How Does Reverse Mortgage Interest Accrue Over Time?

HUD guidance makes clear that HECM balances increase over time as interest and applicable mortgage insurance premiums accrue, which is why payoff projections should always be reviewed with a full amortization schedule.

Your amortization schedule shows the modeled path—treat it as education, not prophecy. HUD HECM hub: HUD.gov HECM. CFPB: CFPB reverse mortgage.

Why balances climb faster than people expect

Accrual applies to a growing base when you take periodic draws. A line of credit can grow unused availability while used balances accrue—read LOC growth.

In my experience working with homeowners in Phoenix, the biggest surprise is how quickly the balance curve changes once clients start layering in multiple draws instead of one. A client I worked with in Mesa recently thought the schedule was wrong until we walked month by month through the first year and saw exactly where the jumps came from. What I find in practice is very different from what most people expect: it is usually the draw timing, not just the interest rate, that drives the emotional reaction.

MIP accrual (HECM)

Ongoing MIP adds to the balance similarly to interest—HECM MIP.

According to HUD, HECM loans include an annual mortgage insurance premium of 0.5% of the outstanding balance, which is one reason projected balances differ from interest-only assumptions.

Variable vs fixed

Adjustable-rate structures can change accrual as index components move—fixed vs adjustable.

Equity is not static

Home value changes while the loan balance grows—net worth framing.

Frequently asked questions

Is it compounding?

Balances typically accrue on an increasing balance as new interest applies—your disclosure language controls.

Can I pay down interest?

Voluntary payments may be limited—ask your servicer.

Does a lower rate always help?

Usually slows growth and can affect PLFs—PLF.

What about tenure payments?

Each monthly advance accrues—tenure.

Next steps

Use the free reverse mortgage calculator and take the free readiness assessment. For schedule-based explanations, use the contact page or about page.

This material is not from HUD or FHA and has not been approved by HUD or any government agency. All reverse mortgage loans are subject to credit and property approval.