Quick Answer
A reverse mortgage has no required monthly payment — but the monthly cost, expressed as the accrual added to the loan balance each month, is approximately 0.57% to 0.63% of the outstanding balance per month (6.88% to 7.63% annually) — meaning a $200,000 outstanding balance accrues approximately $1,147 to $1,271 per month to the loan balance.
- No required monthly payment — the cost accrues to the balance, not your bank account.
- Monthly accrual rate: approximately 0.57% to 0.63% of outstanding balance.
- On a $100,000 balance: approximately $573 to $636 accrues per month.
- On a $200,000 balance: approximately $1,147 to $1,271 accrues per month.
- The same rate drives line of credit growth on unused balances.
- Compare this monthly accrual to the monthly payment you eliminate.
Key Facts
| Topic | Key Fact |
|---|---|
| Monthly payment required | None |
| Monthly accrual rate | ~0.57% to 0.63% of outstanding balance (annual rate / 12) |
| $100K balance monthly accrual | ~$573 to $636 |
| $200K balance monthly accrual | ~$1,147 to $1,271 |
| $300K balance monthly accrual | ~$1,720 to $1,906 |
| Interest component | ~$490 to $553/month on $100K (annual interest / 12) |
| MIP component | ~$42/month on $100K (0.5% annual MIP / 12) |
| LOC growth rate | Same monthly rate applies to unused LOC balance |
Detailed Explanation
The monthly cost of a reverse mortgage is a non-cash accrual — it does not come out of a bank account or require a check. Instead, it accrues to the outstanding loan balance. Expressing this as a monthly cost figure helps borrowers contextualize the reverse mortgage's ongoing expense in familiar terms.
For a borrower who draws $200,000 from a reverse mortgage at closing (after paying off a $150,000 existing mortgage and $20,000 in closing costs from a $370,000 gross draw), the monthly accrual on the $200,000 outstanding balance is approximately $1,147 to $1,271 per month. Compare this to the $1,400 per month mortgage payment that was eliminated: the net cash flow improvement is approximately $129 to $253 per month, and the outstanding balance grows at a rate less than the eliminated payment.
The monthly accrual rate is also the monthly growth rate of unused line of credit balances. A borrower who establishes a $200,000 line of credit and does not draw from it sees the line grow by approximately $1,147 to $1,271 per month (the same rate applied to the unused credit availability). This growth is the financial benefit of early establishment and non-use — real, compounding value that accumulates without any action by the borrower.
The comparison between the monthly accrual cost and any eliminated monthly payment is the core financial analysis for most California borrowers. When the eliminated payment exceeds the monthly accrual, the borrower has a positive net cash flow benefit from the transaction even accounting for the balance growth. When the eliminated payment is smaller than the accrual (which would require a very large outstanding balance relative to the eliminated payment), the analysis is less favorable.
Jay Zayer, CRMP — 18 Years Experience
I convert the annual accrual rate into a monthly number for every client because people think in months, not years. 'Your loan balance will grow by about $1,147 per month on a $200,000 outstanding balance' is more tangible than '6.88% annually.' Then I put that next to the eliminated payment: 'Your mortgage payment that goes away is $1,450 per month.' The monthly math is clear: you keep $303 per month more than the loan costs. The compounding effect over 10 years is favorable. That is the conversation most clients need to have.
Who This Is Right For
This may be a good fit if:
- Every reverse mortgage borrower who thinks in monthly terms and wants to understand the monthly cost equivalent
This may NOT be the right fit if:
- There is no situation where understanding the monthly cost equivalent would be inappropriate
Common Misconception
Myth: A reverse mortgage has no monthly cost.
Fact: While there is no required monthly payment, the reverse mortgage accrues approximately 0.57% to 0.63% of the outstanding balance to the loan each month — a real ongoing cost expressed as balance growth rather than a cash payment.
Source: HUD HECM program guidelines
Authoritative Sources
- HUD: HECM interest accrual — hud.gov
- CFPB: Reverse mortgage ongoing cost — consumerfinance.gov
- NRMLA: Monthly cost analysis — nrmlaonline.org
People Also Ask
How much does the reverse mortgage balance grow each month?
At approximately 0.57% to 0.63% of the outstanding balance — or $573 to $636 per month on a $100,000 balance, and $1,147 to $1,271 per month on a $200,000 balance.
Is the monthly accrual on a reverse mortgage more or less than a mortgage payment?
It depends on the balance and the payment. For many California borrowers, the monthly accrual on the amount drawn is less than the eliminated mortgage payment — producing a positive net monthly cash flow benefit.
Does the unused line of credit grow at the same monthly rate?
Yes — the unused line of credit grows at the same effective monthly rate (approximately 0.57% to 0.63%) as the interest accrual on the outstanding balance.