Quick Answer
The reverse mortgage servicer sends an annual statement showing the current outstanding balance, total interest accrued during the year, the available line of credit (if applicable), property tax and insurance paid from LESA accounts, and the loan's performance relative to the property's current estimated value.
- Sent annually by the servicer — review promptly when received.
- Shows current outstanding loan balance including all accrued interest.
- Shows available line of credit balance and growth during the year.
- Shows LESA account balance and payments made (if applicable).
- Shows 1098 interest information for tax purposes.
- Compare annual balance growth to estimated home value to assess equity position.
Key Facts
| Topic | Key Fact |
|---|---|
| Frequency | Annual — some servicers provide monthly statements |
| Content | Balance, accrued interest, LOC balance, LESA payments, property value estimate |
| Tax information | Form 1098 for interest deductibility when loan is repaid |
| LOC balance | Shows current available credit including growth on unused balance |
| LESA statement | LESA account activity: balance, tax payments, insurance payments |
| Property value | Estimated current value — not a new appraisal |
| Statement purpose | Transparency into loan performance and equity position |
| Review action | Update contact information if changed; flag any discrepancies |
Detailed Explanation
The annual statement provides a comprehensive view of the reverse mortgage's status at a specific point in time. The most important number for most borrowers is the outstanding balance — the total amount owed including all principal disbursed, all accrued interest, and all accrued FHA MIP. This balance grows over time and represents the amount that would need to be repaid if the loan became due today.
For borrowers with a line of credit, the statement shows both the outstanding balance and the available line of credit. Because the line of credit grows at the loan's effective rate, borrowers who have not drawn from the line see it grow every year. The growth on the unused line of credit is one of the most compelling features for long-term planning — a line of credit established at $200,000 at closing may show $215,000 on the first-year statement and $230,000 on the second-year statement without any draws.
The LESA statement section (for borrowers with set-asides) shows the LESA account balance, the property tax payments made during the year, and the insurance premium payments made. This section gives LESA-funded borrowers a complete accounting of the obligations being managed on their behalf and confirms the taxes and insurance were paid on time.
The annual interest statement is important for tax planning because reverse mortgage interest is only deductible when the loan is repaid — not when it accrues. The Form 1098 documentation in the annual statement records the interest accrued during the year, but the deduction cannot be claimed on that year's return. This deferred deductibility is often misunderstood. Jay reminds every client with a reverse mortgage to inform their tax advisor about the deferred interest deductibility so it can be incorporated into estate and tax planning.
Jay Zayer, CRMP — 18 Years Experience
The annual statement review call is one of the most valuable post-closing touchpoints I have with clients. We review the balance together, compare it to the home's estimated current value, project the balance and value forward 5 and 10 years, and confirm the client is comfortable with the trajectory. The clients who are most anxious about the reverse mortgage are often the ones who have not looked at their annual statement. The clients who understand their equity position and the loan's long-term trajectory are consistently the most satisfied with the product.
Who This Is Right For
This may be a good fit if:
- Every reverse mortgage borrower who wants to understand their annual statement and how to use it for planning
This may NOT be the right fit if:
- There is no situation where reviewing the annual statement would be inappropriate
Common Misconception
Myth: The reverse mortgage balance grows out of control.
Fact: The annual statement provides transparency into exactly how much the balance has grown. In most California markets, home appreciation partially or fully offsets the balance growth.
Source: HUD HECM annual statement requirements
Authoritative Sources
- HUD: HECM annual statement requirements — hud.gov
- IRS: Reverse mortgage interest deductibility — irs.gov
- CFPB: Reverse mortgage statement — consumerfinance.gov
People Also Ask
When is reverse mortgage interest tax deductible?
Reverse mortgage interest is deductible only when the loan is repaid — not when it accrues annually. Inform your tax advisor about this deferred deductibility.
What is the line of credit balance on my annual statement?
The available amount you can draw from the line of credit, which grows at approximately 7% per year on unused balances.
What should I do when I receive the annual reverse mortgage statement?
Review the balance, available line of credit, and LESA activity. Compare the balance to your home's estimated current value. Contact Jay if you have questions about the numbers.