Reverse mortgage annual MIP is 0.50% of the outstanding HECM loan balance, accruing to that balance under HUD Mortgagee Letter 2017-12. Jay Zayer, CRMP, is a reverse mortgage specialist at reversemortgage.coach. There is no monthly MIP coupon to mail. The charge funds FHA insurance that supports the non-recourse structure in 24 CFR 206.27(b)(8). It is not optional because the line sits unused.
Picture a homeowner who is Knox, 63, occupying a house in Carlsbad, California, who saw 0.50% on a worksheet and asked whether skipping draws would skip MIP. It would not skip the balance that already exists. See the annual statement for how the charge shows up. Stay here for what 0.50% is actually levied on.
A HECM remains FHA-insured. Annual MIP is not a public subscription fee.
What is 0.50% annual MIP actually charged on, year after year?
The outstanding principal balance, including prior interest, prior MIP, financed closing costs, and draws. Mortgagee Letter 2017-12 is the source. Do not multiply 0.50% by last year’s Zillow printout. Do not multiply it by the $1,249,125 cap unless that cap was the claim amount and you are mixing it with initial MIP. Initial MIP is the 2.00% of maximum claim amount charged at origination. Annual MIP is the later 0.50% of whatever is outstanding.
Knox’s leftover cash at origination still lands in a mid-30s to low-50s percent of appraised value, depending on age and expected rate, after 2.00% initial MIP and other costs. Run the leftover-cash worksheet. Do not interpolate HUD rows.
Counseling still costs $125–$175. The HUD certificate lasts 180 days. Neither number is annual MIP.
How does annual MIP compound with interest, without a coupon?
Interest accrues. Annual MIP accrues. Both add to the balance. An adjustable HECM still uses 1-month CMT plus lender margin for the note rate. Expected rate — 10-year CMT plus margin, rounded to 0.125% under 24 CFR 206.3 — already set the principal-limit factor at origination. Mixing those two rates is how people misread a statement.
A second geography: a 79-year-old in Yuma whose Arizona statement grew faster than a sibling expected because financed costs plus a first-year draw already created a real balance. Unused line growth does not cancel annual MIP on that balance.
2026 files use the $1,249,125 cap in Mortgagee Letter 2025-22. Origination is capped at $6,000 under 24 CFR 206.31. If residual income requires a LESA, that set-aside is origination-only. Jay confirmed a LESA cannot be added later to “cover MIP.” MIP is not a property charge. Taxes and insurance are.
When does annual MIP stop, and who still sees it after death?
It stops when the loan is paid off. Until then, heirs who keep or sell still see accrual through the good-through date on a payoff quote. 24 CFR 206.125(a)(2)(i) still names the outstanding balance to keep the house. A death does not rebate prior annual MIP.
Annual MIP on an old HECM keeps accruing until a refinance payoff posts; I still treat ~30 days after a complete file as the average close I mention, not a promise. Annual MIP on the old loan accrues until that payoff posts. 24 CFR 206.53(c) credits MIP already paid when a HECM-to-HECM refinance calculates new initial MIP. That credit is not a refund check of annual MIP.
Proprietary notes Jay closes — HomeSafe, Longbridge Platinum, Finance of America, Mutual of Omaha Secure Equity — are not FHA-insured and do not use this 0.50% HECM annual MIP. Compare a Loan Estimate. Do not import HECM MIP onto a private note.
How does annual MIP show on the statement versus a payoff quote?
The annual statement is a report. A payoff quote is a good-through figure. Both include 0.50% annual MIP of outstanding balance, but only the quote is dated for escrow. Knox should not hand last year’s statement to a title company. Heirs should not either. See the annual-statement page for the mailing. Stay here for the 0.50% charge itself.
On a $100,000 outstanding balance, 0.50% is $500 a year, accruing, not billed. That is illustration, not Knox’s quote. His actual balance includes financed 2.00% initial MIP, origination, draws, and interest at 1-month CMT plus margin. Annual MIP rides that balance. Proprietary notes do not use this 0.50%. Compare the HECM insurance to the private pricing instead of calling 0.50% a hidden coupon.
Who should not skip a HECM because a seminar called 0.50% “the hidden payment”?
This path does not help a household that wanted zero accrual and also wanted no required P&I coupon. Occupancy is still 24 CFR 206.39. I work with multiple lenders. I will originate when leftover cash after costs is worth the insurance. I will turn away a “MIP is a trick” plan whose only thesis is a slogan.
If leftover cash after 2.00% of claim amount is already a token, annual MIP is not the reason to skip — the leftover-cash math is. When the math works, 0.50% of outstanding balance is the ongoing insurance price, accruing, not billed monthly. See upfront FHA MIP for the origination charge that is a different animal.
Knox can dislike 0.50% accruing. He cannot skip it on a HECM by leaving the line unused. Financed costs already created a balance. Annual MIP rides that balance until payoff. Proprietary notes price insurance differently. Compare leftover cash, not a slogan about hidden coupons. On a HECM, 0.50% annual MIP of outstanding balance is insurance that supports 24 CFR 206.27(b)(8) non-recourse, accruing, not billed. Knox does not write a monthly MIP check. He also does not skip the charge by waiting to draw.