A reverse mortgage on a $400,000 home
What a $400,000 house is worth to a HECM at each age, with the house paid off or with a mortgage still on it, and why this value is where the fee rule stops growing.
Cash you can use in the first 12 months
$21,280
Then $63,520 more after month 12, growing at 6.49 % a year while unused.
| Factor at age 73, 6.625 % | 0.397 |
| Maximum claim amount | $400,000 |
| Principal limit (line 1) | $158,800 |
| Upfront MIP, 2 % (line 3) | $8,000 |
| Origination fee | $6,000 |
| Other closing costs | $0 |
| Mortgage paid off (line 5) | $60,000 |
| Mandatory obligations (line 10) | $74,000 |
| First-year limit (line 21) | $95,280 |
| Net principal limit (line 25) | $84,800 |
Expected rate 6.65 % (10-year Treasury + margin), read as 6.625 % in HUD's table. Estimate, not a loan offer.
| Year | Age | Loan balance | Unused credit line |
|---|---|---|---|
| 1 | 74 | $78,948 | $90,470 |
| 2 | 75 | $84,227 | $96,520 |
| 3 | 76 | $89,859 | $102,973 |
| 5 | 78 | $102,278 | $117,205 |
| 10 | 83 | $141,361 | $161,992 |
| 15 | 88 | $195,379 | $223,894 |
| 20 | 93 | $270,039 | $309,450 |
| 25 | 98 | $373,229 | $427,701 |
| 30 | 103 | $515,852 | $591,138 |
Worked out by Radif Partners · How we calculate · factors read on hud.gov · not a loan offer
A $400,000 home is the exact value at which the HECM origination fee reaches its legal ceiling of $6,000, so the two fixed charges of the loan are $8,000 of upfront mortgage insurance and $6,000 of origination, $14,000 in all, or 3.5 % of the value. The amount itself depends on age. At an expected rate of 6.65 % (10-year Treasury at 5.15 % plus an example margin of 1.5 %), the principal limit is $131,200 at 62, $166,000 at 75 and $239,200 at 90. A 73-year-old owner with $60,000 still owed gets a principal limit of $158,800: the loan clears the mortgage and the two charges, leaves $21,280 usable in the first 12 months and $63,520 more after that. With $120,000 owed instead, a 62-year-old would have to bring $2,800 to closing.
Where $400,000 sits in the fee rule
The origination fee on a HECM (Home Equity Conversion Mortgage, the reverse mortgage insured by the FHA) has a formula written in federal rules: 2 % of the first $200,000 of the maximum claim amount (MCA), plus 1 % of the part above it, never less than $2,500 and never more than $6,000 (24 CFR 206.31). On a $400,000 house, the first part gives $4,000 and the second $2,000. The sum lands exactly on the cap.
That makes $400,000 a turning point. Between $200,000 and $400,000, every $10,000 of appraised value adds $100 to the fee a lender may charge. Above it, the fee stops rising while the loan keeps growing with the value, so the fee becomes a smaller and smaller share. The upfront mortgage insurance premium (MIP) behaves differently: it is a flat 2 % of the MCA, with no cap other than the national limit.
| Appraised value | Origination cap | Upfront MIP | Both, share of value |
|---|---|---|---|
| $300,000 | $5,000 | $6,000 | 3.67 % |
| $350,000 | $5,500 | $7,000 | 3.57 % |
| $375,000 | $5,750 | $7,500 | 3.53 % |
| $400,000 | $6,000 | $8,000 | 3.50 % |
| $450,000 | $6,000 | $9,000 | 3.33 % |
| $500,000 | $6,000 | $10,000 | 3.20 % |
Appraisal, title and recording charges are separate. They depend on the county and the providers, so the only reliable figures are the ones on the lender’s cost estimate; the calculator has a field for them.
What a $400,000 house gives at each age
The principal limit is the MCA times HUD's principal limit factor (PLF) for the age of the youngest borrower and the expected rate. Below, the house carries no mortgage, the expected rate is 6.65 % (read as 6.625 % in HUD's table), the origination fee is at its cap and nothing else is charged. The first-year column is what you can use in the first 12 months; the last one is what opens in month 13, before any growth.
| Age | Factor | Principal limit | First 12 months | From month 13 |
|---|---|---|---|---|
| 62 | 0.328 | $131,200 | $64,720 | $52,480 |
| 65 | 0.349 | $139,600 | $69,760 | $55,840 |
| 68 | 0.373 | $149,200 | $75,520 | $59,680 |
| 70 | 0.386 | $154,400 | $78,640 | $61,760 |
| 75 | 0.415 | $166,000 | $85,600 | $66,400 |
| 80 | 0.461 | $184,400 | $96,640 | $73,760 |
| 85 | 0.525 | $210,000 | $112,000 | $84,000 |
| 90 | 0.598 | $239,200 | $129,520 | $95,680 |
The gap between 62 and 90 is $108,000 on the same house. Most of it comes after 75, where the factor climbs faster. In the first year, with no debt, the usable amount is 60 % of the principal limit minus the $14,000 of charges, because those charges count as obligations paid at closing.
Your age on a $400,000 home
Cash you can use in the first 12 months
$73,600
| Factor at age 67, 6.625 % | 0.365 |
| Maximum claim amount | $400,000 |
| Principal limit (line 1) | $146,000 |
| Upfront MIP, 2 % (line 3) | $8,000 |
With a mortgage still on the house
Many owners of a $400,000 house still owe on it. The HECM must pay that loan off at closing, and the payoff joins the charges as a mandatory obligation. Once obligations pass half the principal limit, the first-year rule switches: the lender may release the obligations plus 10 % of the principal limit, and no more, until month 13. The next table keeps the same house and adds $120,000 of debt.
| Age | Obligations | First 12 months | From month 13 | Cash to bring |
|---|---|---|---|---|
| 62 | $134,000 | $0 | $0 | $2,800 |
| 65 | $134,000 | $5,600 | $0 | $0 |
| 68 | $134,000 | $14,920 | $280 | $0 |
| 70 | $134,000 | $15,440 | $4,960 | $0 |
| 75 | $134,000 | $16,600 | $15,400 | $0 |
| 80 | $134,000 | $18,440 | $31,960 | $0 |
| 85 | $134,000 | $21,000 | $55,000 | $0 |
| 90 | $134,000 | $23,920 | $81,280 | $0 |
At 62 the debt and the charges come to $134,000, more than the $131,200 principal limit, so $2,800 has to come from savings or a sale of other assets. At 65 the loan just covers everything and leaves $5,600. From 68 on, the first year leaves exactly 10 % of the principal limit as cash, because the obligations are above half of it. The rest stays in the line of credit for later.
A simpler way to read it: the largest mortgage this house can clear with no cash from you is the principal limit minus the two charges. That is $117,200 at 62, $140,400 at 70, $170,400 at 80 and $225,200 at 90. Other closing costs lower each figure dollar for dollar.
Try your mortgage balance
Cash available in the first 12 months
$15,880
| Principal limit | $158,800 |
| 60 % of it (line 17) | $95,280 |
| Obligations + 10 % (line 18) | $119,880 |
| Greater of the two (line 19) | $119,880 |
Our worked case: 73 years old, $60,000 owed
At 73 the factor is 0.397, so the principal limit is $158,800. Obligations are the $60,000 payoff, $8,000 of insurance and $6,000 of origination: $74,000, below half of the principal limit, so the usual 60 % rule applies. The lender may disburse $95,280 in year one; after the obligations, $21,280 is yours to use. The other $63,520 opens in month 13. The monthly mortgage payment on the old loan disappears, and for this owner that is the main change in the monthly budget. The page on paying off a mortgage looks at that case in more depth.
The credit line of a $400,000 house after ten years
An adjustable HECM's unused credit grows each month at the note rate plus 0.5 % of annual MIP. Take the same 73-year-old, but debt-free, who draws nothing. After ten years, at a note rate held at 5.99 %, the available credit would be about $276,609, while the balance, made of the financed charges and their interest, would stand near $26,744. That growth is borrowing room, not money earned, and it ends when the loan becomes due. The rate will not stay fixed, so treat the figure as an order of size. The line of credit page has the method.