HECM mortgage insurance: the two premiums in dollars
What the FHA charges to insure a reverse mortgage, upfront and every month, and what that insurance does for you, your heirs and the lender.
Upfront mortgage insurance
$10,400
Then $16,284 of annual MIP added to the balance over 12 years.
| Maximum claim amount | $520,000 |
| Upfront rate | 2 % |
| Annual rate on the balance | 0.5 % |
| Annual MIP, first year | $927 |
| Interest over the period | $195,088 |
| Balance at the end | $391,372 |
Both premiums are added to the loan balance; nothing is paid out of pocket unless you choose to.
Worked out by Radif Partners · How we calculate · factors read on hud.gov · not a loan offer
Every HECM carries two FHA premiums. The upfront one is 2 % of the maximum claim amount, whatever you borrow: $10,400 on a $520,000 home, and at most $24,983, reached when the home is worth the $1,249,125 limit of 2026 or more. The annual one is 0.5 % of the outstanding balance, accruing from closing and added to the loan each month along with the interest. On a $180,000 balance at a note rate of 5.99 %, it adds $927 the first year and $12,623 over ten years, while interest adds $151,228. These rates apply to every case number assigned since October 2, 2017 (Mortgagee Letter 2017-12). In exchange, the loan is non-recourse: neither you nor your heirs owe more than the home brings, and if the lender stops paying what the loan promises, HUD steps in to make those payments.
Two premiums on two different bases
The upfront premium, which HUD calls the initial MIP, is a flat 2 % of the maximum claim amount, the lesser of the appraised value and the national limit. It is computed once, at closing, and it is the same whether you take a large draw on day one or leave everything in a line of credit. The annual premium is different in kind: 0.5 % a year of the outstanding balance, charged in monthly installments from the closing date. A borrower who draws little pays little of it; a balance that doubles pays twice as much.
| Home value | Maximum claim amount | Upfront premium | Share of the value |
|---|---|---|---|
| $150,000 | $150,000 | $3,000 | 2.00 % |
| $250,000 | $250,000 | $5,000 | 2.00 % |
| $400,000 | $400,000 | $8,000 | 2.00 % |
| $520,000 | $520,000 | $10,400 | 2.00 % |
| $800,000 | $800,000 | $16,000 | 2.00 % |
| $1,249,125 | $1,249,125 | $24,983 | 2.00 % |
| $1,600,000 | $1,249,125 | $24,983 | 1.56 % |
The cap on the claim amount is the only reason the share falls in the last row: a $1,600,000 home pays the same $24,983 as one worth exactly the limit. Below it, the premium is always 2 % of the value.
Upfront premium for another home
Upfront mortgage insurance
$13,600
| Maximum claim amount | $680,000 |
| Upfront rate | 2 % |
| Annual rate on the balance | 0.5 % |
| Annual MIP, first year | $464 |
The annual premium on a growing balance
Neither premium is billed to you. The Handbook says the upfront one must be financed or paid in cash at closing, and 24 CFR 206.27 lets the monthly premium be added to the outstanding principal balance once the lender has paid it to HUD. Once added, it accrues interest like any other part of the balance. Take a balance of $180,000 left alone at a note rate of 5.99 %: the premium adds $927 in the first year, and the amount grows each year with the balance.
| Years | Balance | Interest added | Annual MIP added |
|---|---|---|---|
| 1 | $192,036 | $11,109 | $927 |
| 5 | $248,783 | $63,484 | $5,299 |
| 10 | $343,851 | $151,228 | $12,623 |
| 15 | $475,247 | $272,500 | $22,746 |
| 20 | $656,852 | $440,115 | $36,737 |
Over 20 years the insurance adds $36,737 and the interest $440,115. The premium is the smaller of the two by far; what makes it matter is that it is never skipped, and that it compounds. An adjustable rate moves the interest column with the 1-year Treasury; the premium rate does not move.
Upfront or annual: which weighs more
On the $520,000 home, the two premiums can be set side by side over 12 years. The upfront premium is $10,400, charged once. If it is financed, it does not stay at that amount: it sits in the balance from the first day and grows at the note rate plus the annual premium, to $22,613 after 12 years. The annual premium on a $180,000 balance adds $16,284 over the same 12 years. For a borrower who draws little, the upfront premium is most of the insurance bill; for one with a large balance, the annual premium catches up. Paying the upfront premium in cash at closing, which the Handbook allows, keeps it out of the balance altogether.
What the insurance pays for
The money goes to the FHA insurance fund, and three promises written into 24 CFR 206 come with it. The first protects you: the borrower has no personal liability for the balance, the lender can collect only through the sale of the home, and it cannot obtain a deficiency judgment after a foreclosure. If the balance has grown past what the home sells for, HUD pays the lender's claim for the difference. That is why heirs who want to keep the home can settle it for the lesser of the balance and 95 % of the appraised value, as the page on heirs explains.
The second protects your cash flow. If the lender is unable or unwilling to make the payments the mortgage promises, from a line of credit or a monthly payment, HUD makes them and recovers the cost from the lender or takes over the loan. The third protects the lender: when the balance reaches 98 % of the maximum claim amount, a lender under the assignment option can hand the loan to HUD and be paid an insurance claim.
Annual premium on your balance
Upfront mortgage insurance
$10,400
| Maximum claim amount | $520,000 |
| Upfront rate | 2 % |
| Annual rate on the balance | 0.5 % |
| Annual MIP, first year | $1,236 |
Legal ceilings and the rates in force
The regulation sets maximums, not the rates themselves. Under 24 CFR 206.105, the initial premium may not exceed 3 % of the maximum claim amount and the monthly premium may not exceed an annual rate of 1.5 % of the remaining balance; HUD sets the actual rates by notice. The notice in force is Mortgagee Letter 2017-12, for case numbers assigned from October 2, 2017: 2 % upfront, 0.5 % a year. Before it, from November 2014, Mortgagee Letter 2014-21 charged 0.5 % or 2.5 % upfront and 1.25 % a year. A loan keeps the rates of its case number date, so an older HECM may still accrue the higher annual rate.
That last point matters for a refinance. When one HECM replaces another, the upfront premium on the new loan is reduced by the premium already paid on the old one, and only a positive difference is due. The refinance page works through the credit, and the costs page sets the premium beside the other charges of a loan.