A reverse mortgage on a $750,000 home
A valuable house still under the FHA limit: what the first-year rule lets you take in dollars, and what happens when a big mortgage has to be paid off first.
Cash available in the first 12 months
$33,750
Obligations take 77 % of the principal limit: you get them + 10 %.
| Principal limit | $337,500 |
| 60 % of it (line 17) | $202,500 |
| Obligations + 10 % (line 18) | $294,750 |
| Greater of the two (line 19) | $294,750 |
| Mandatory obligations | $261,000 |
| Initial disbursement limit | $294,750 |
| Available after month 12 | $42,750 |
Worked out by Radif Partners · How we calculate · factors read on hud.gov · not a loan offer
On a $750,000 home the whole value counts toward a HECM, since it sits well under the $1,249,125 limit of 2026, and the fixed charges are light: $15,000 of upfront mortgage insurance and an origination fee capped at $6,000, together 2.8 % of the value. The question that decides the cash is the first-year limit. At 79, with an expected rate of 6.65 % (10-year Treasury plus an example margin of 1.5 %), the principal limit is $337,500. With no mortgage, $202,500 can be disbursed in the first 12 months, 60 % of the principal limit, of which $181,500 reaches you after the charges. With $240,000 still owed, the obligations take 77 % of the principal limit: the first year is then capped at the obligations plus 10 %, which leaves $33,750 of cash and $42,750 for month 13 onward.
The first-year limit, line by line, on a $750,000 house
HUD's payment plan form sets the first-year limit in three lines. Line 17 is 60 % of the principal limit. Line 18 is the mandatory obligations (the mortgage payoff, the upfront mortgage insurance premium or MIP, the origination fee, other closing costs) plus 10 % of the principal limit. Line 19 keeps the larger of the two, and line 21, the initial disbursement limit, is the lesser of line 19 and the principal limit net of any set-aside: no more than that can be disbursed in the first 12 months (HUD payment plan form). On a $750,000 house at age 79, line 17 is $202,500. As long as the debt is small, line 17 wins and the cap is a fixed dollar figure; once the debt is large, line 18 wins and the cap moves with the debt.
The table follows the same house, the same 79-year-old and the same rate, with a mortgage balance that grows from zero.
| Mortgage owed | Obligations | Line that applies | First 12 months | From month 13 | Cash to bring |
|---|---|---|---|---|---|
| $0 | $21,000 | Line 17 | $181,500 | $135,000 | $0 |
| $75,000 | $96,000 | Line 17 | $106,500 | $135,000 | $0 |
| $150,000 | $171,000 | Line 18 | $33,750 | $132,750 | $0 |
| $200,000 | $221,000 | Line 18 | $33,750 | $82,750 | $0 |
| $240,000 | $261,000 | Line 18 | $33,750 | $42,750 | $0 |
| $300,000 | $321,000 | Line 18 | $16,500 | $0 | $0 |
| $350,000 | $371,000 | Line 18 | $0 | $0 | $33,500 |
Three zones show up. Up to about $147,750 of debt, each dollar of payoff removes a dollar of first-year cash. From there to about $282,750, the first-year cash holds at $33,750 while the room after month 12 shrinks. Then line 18 runs into the principal limit itself, and the first-year cash falls to zero at $316,500 of debt. Beyond, the payoff is larger than the loan can cover: at $350,000 owed, $33,500 is due in cash at closing.
Enter your payoff on a $750,000 home
Cash available in the first 12 months
$33,750
| Principal limit | $337,500 |
| 60 % of it (line 17) | $202,500 |
| Obligations + 10 % (line 18) | $234,750 |
| Greater of the two (line 19) | $234,750 |
Why the capped fee weighs little here
On a $750,000 appraisal, the origination formula of 24 CFR 206.31 would give more than $6,000, but the rule stops there. The fee is 0.8 % of the value, against 1.5 % on a $400,000 house. The upfront MIP does not have a cap of its own: it is 2 % of the maximum claim amount, so $15,000 here, more than twice the fee. Together they take 6.2 % of the principal limit at 79.
The cost that matters on a house like this is not the fee but the interest on a large payoff. A $240,000 mortgage moved into a HECM keeps accruing at the note rate plus 0.5 % of annual MIP, with no payment. At a note rate of 5.99 % held steady, that payoff alone would grow to about $458,468 in ten years. The loan balance page shows the curve.
Growth of the payoff with no payment
Loan balance after 12 years
$521,829
| Effective yearly growth | 6.69 % |
| Years to double | 10.7 |
| Interest | $260,117 |
| Mortgage insurance | $21,713 |
The debt a $750,000 house can absorb, by age
Younger borrowers get a smaller factor, so the same debt hits the limits sooner. The table gives, for each age, the principal limit, the debt above which the 10 % rule takes over, and the largest debt the loan can pay off with no cash from you. Other closing costs would lower both debt columns by their amount.
| Age | Principal limit | Line 18 takes over above | Largest payoff, no cash in | First 12 months, no debt |
|---|---|---|---|---|
| 62 | $246,000 | $102,000 | $225,000 | $126,600 |
| 66 | $267,750 | $112,875 | $246,750 | $139,650 |
| 70 | $289,500 | $123,750 | $268,500 | $152,700 |
| 74 | $303,750 | $130,875 | $282,750 | $161,250 |
| 79 | $337,500 | $147,750 | $316,500 | $181,500 |
| 84 | $384,000 | $171,000 | $363,000 | $209,400 |
| 88 | $424,500 | $191,250 | $403,500 | $233,700 |
At 62 the house clears $225,000 of debt; at 88, $403,500. A borrower who comes up short has to find the gap in cash or reduce the mortgage before closing. The age that counts is that of the youngest borrower or eligible non-borrowing spouse, so a younger spouse moves the whole row.
The same arithmetic decides monthly payments. Spread over the months HUD uses for tenure, the 79-year-old with no debt could receive about $2,415 a month for as long as the house stays the main residence. With the $240,000 payoff taken first, only the net principal limit of $76,500 is left to spread, and the payment drops to about $584. A large payoff does not only cut the first year; it shrinks every later way of drawing the money. The monthly payments page explains the sizing.
Our worked case: 79, $240,000 still owed
The principal limit at 79 is $337,500. Obligations come to $261,000: the $240,000 payoff, $15,000 of MIP and $6,000 of fee. That is above half the principal limit, so line 18 applies: obligations plus $33,750, a first-year limit of $294,750. After the payoff and the charges, $33,750 is left to use in year one, and $42,750 more becomes available in month 13. The monthly payment on the old mortgage ends at closing; property taxes, insurance and upkeep stay with the owner. The existing mortgage page and the first-year limit page go further.
One check before relying on these numbers: the appraisal. The maximum claim amount uses the appraised value, and when HUD's collateral risk assessment calls for a second appraisal, the lender must use the lower of the two (HUD Handbook 4000.1). On a large debt, an appraisal $50,000 lower at 79 cuts the principal limit by $22,500, and with line 18 in force most of that loss comes out of the room after month 12.