Voluntary Payments on a HECM

The potential benefits of making voluntary HECM payments are easy to overlook, and over time they can be substantial. A payment can work in two directions at once: slowing or reducing your loan balance while restoring line-of-credit borrowing capacity that can continue to grow. The numbers may surprise you, especially when you look several years ahead and consider the financial needs that can come with aging.

Not for fixed-rate HECMs. Fixed-rate HECMs do not provide a reusable line of credit after partial repayment.

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Build Your Own HECM Scenario

Already have a HECM? Use the figures shown on your current statement.
Considering a HECM? Ask a Reverse Mortgage Professional for a proposed loan balance, available line of credit, and estimated note rate based on your situation. Generic online estimates may not reflect the HECM that would actually be available to you.

Voluntary Monthly Payment to Test

Start here. Enter the monthly amount you want to see applied to the HECM projection.

/ month

For this estimate, the calculator first adds the month’s interest and FHA MIP, then applies the voluntary payment. Actual results may vary based on payment timing and servicer practices.

KEEP AT LEAST A $500 LOAN BALANCE

If you want to keep the HECM and its line of credit open, do not make a payment that would reduce the loan balance below $500 without first confirming the exact amount with your servicer. This calculator uses $500 as a practical safety cushion. It is not a HUD-required minimum. Paying the HECM in full closes the loan and ends access to the line of credit.

Current or Proposed HECM Loan Balance

Use the current HECM principal balance shown on your statement, or enter the proposed starting balance provided for the scenario you want to explore.

Current or Proposed Available Line of Credit

Use the available line of credit shown on your HECM statement or provided by your Reverse Mortgage Professional. New HECM: Access to line-of-credit funds during the first year may be limited by FHA rules. Consult with your Reverse Mortgage Professional regarding access to line-of-credit funds during the first year.

Choose Note Rate if You Want to Use the Current or Starting Rate

For most existing HECMs, choose Note Rate. You can usually find the current Note Rate on your monthly servicer statement. If you are reviewing a new HECM illustration, you may choose the Initial or Estimated Note Rate shown there, or use the Expected Rate if you want to project using that longer-term HECM assumption. Use What-If Rate only when you want to test a different rate assumption.

Note Rate

Use This Rate

For a new adjustable-rate HECM, this is the starting interest rate. The calculator adds the annual FHA MIP to the Note Rate to determine the combined rate used in the projection. For an existing HECM, use the current Note Rate shown on your statement.

— Note Rate + 0.50% annual FHA MIP = — combined annual projection input

Expected Rate

Use This Rate

New HECM illustration: enter the Expected Rate if it is shown. HUD uses the Expected Rate in the initial HECM calculations, including determining how much borrowing capacity the HECM initially provides. It gives those calculations a standardized longer-term rate assumption rather than simply assuming the starting Note Rate will remain unchanged. When the Expected Rate is higher than the starting Note Rate, it results in a more conservative initial borrowing-capacity calculation. It is not the current Note Rate or a prediction of future Note Rates.

— Expected Rate + 0.50% annual FHA MIP = — combined annual projection input

What-If Rate

Use This Rate

Choose your own projection rate to see how a different rate assumption could affect the results. It does not predict future rates or change the rate on the HECM.

— What-If Rate + 0.50% annual FHA MIP = — combined annual projection input

Other charges used in this estimate: FHA MIP 0.50% · Servicing fee $0/month Change

Annual FHA MIP 0.50% is the current annual MIP for new HECMs. Some older HECMs use 1.25%. Check your loan documents or ask your servicer if you are unsure.

Monthly Servicing Fee, if Any

Most HECMs do not have a separate monthly servicing fee. If none is shown on your statement or loan documents, leave $0.

Adjustable rates can change. No one knows what an adjustable-rate HECM’s Note Rate will be years from now. The app does not try to predict future rates. It holds whichever rate assumption you select above constant for the projection period.

Need Help Finding or Estimating the Rates? Here’s How They Work.

Use the lender’s or servicer’s actual figures whenever they are available. The information below is mainly for understanding the numbers or creating a rough estimate when a figure is not yet available.

What Is the Note Rate?

The Note Rate is the interest rate used on the HECM before FHA mortgage insurance is added.

If you already have a HECM, use the current Note Rate shown on your statement or loan information. If you are reviewing a new HECM illustration, use the lender’s estimated or initial Note Rate.

A little more technical: For a CMT-based adjustable-rate HECM, the Note Rate is generally the applicable CMT index plus the lender’s margin. Monthly-adjusting CMT HECMs may use the 1-month CMT or 1-year CMT. Annually adjusting CMT HECMs use the 1-year CMT. If the illustration uses a different approved index, such as 30-Day Average SOFR, use the lender-provided Note Rate rather than the CMT shortcut below.

What Is the Expected Rate?

The Expected Rate is a separate HECM calculation rate used on a new adjustable-rate HECM. It is not the Note Rate being charged on the loan.

HUD uses it as one of the factors in determining how much borrowing capacity the HECM initially provides. Long-term HECM illustrations may also use it as a single rate assumption.

A little more technical: For a CMT-based adjustable-rate HECM, the Expected Rate is generally the 10-year CMT plus the lender’s margin.

The Expected Rate is not a forecast of future Note Rates.

How to Find the CMT Numbers on the Federal Reserve H.15 Page

A CMT-based adjustable HECM can use different Treasury constant maturity rates for different purposes. They are not interchangeable.

For the Note Rate: use the CMT maturity named in the HECM illustration or Note. A monthly-adjusting CMT HECM may use the 1-month CMT or 1-year CMT. An annually adjusting CMT HECM uses the 1-year CMT.

For the Expected Rate: use the 10-year CMT. HUD uses the Expected Rate in the initial HECM calculations, including the calculation of initial borrowing capacity. It is a standardized longer-term assumption, not the borrower’s current Note Rate and not a prediction of future Note Rates.

Lender Margin: the margin is provided by the lender. It is added to the applicable CMT to determine the Note Rate, and for a CMT-based HECM the same lender margin is added to the 10-year CMT to determine the Expected Rate.

Open the Federal Reserve’s H.15 Selected Interest Rates page.
Scroll to Treasury constant maturities, then use the Nominal rows.
For the Note Rate, find the CMT maturity specified in the HECM illustration or Note: 1-month or 1-year.
For the Expected Rate, find the 10-year CMT.
Use the value in the most recent date column and add the lender-provided margin. Do not use the separate Treasury-bill rows.

Note Rate example: 1-year CMT 4.000% + 2.250% lender margin = 6.250% Note Rate.
Expected Rate example: 10-year CMT 4.625% + 2.250% lender margin = 6.875% Expected Rate.
The lender margin is the same in both examples. The Treasury index is different because the Note Rate and Expected Rate serve different purposes.

Need a Ballpark Note Rate?

This shortcut is for CMT-based HECMs. Choose the CMT index named in the HECM illustration or Note, enter its current value from the Federal Reserve H.15 page, and use the margin provided by the lender.

CMT Used for the Note Rate

CMT Value

Lender Margin

Ballpark Note Rate: —

The app will use the CMT value with the margin you select to fill the Note Rate box. This is only a rough estimating shortcut to help you explore the calculator. It is not an actual HECM rate, quote, offer, promise, or statement of current market pricing. A Reverse Mortgage Professional can provide the applicable index, margin, and estimated Note Rate for a specific HECM scenario.

Need a Ballpark Expected Rate?

Use the 10-year CMT from Treasury constant maturities → Nominal on the same Federal Reserve H.15 page, then add the margin provided by the lender.

10-Year CMT

Lender Margin

Ballpark Expected Rate: —

The app adds the 10-year CMT and margin and fills the Expected Rate box. Use the lender’s actual Expected Rate when one is available. This is only an estimating shortcut, not a quote, offer, promise, or prediction of future Note Rates.

What MIP Does

HECMs are insured by FHA. The annual Mortgage Insurance Premium is charged on the outstanding loan balance along with interest. The current annual MIP for new HECMs is 0.50%; some older HECMs use 1.25%.

That insurance provides important protections. It helps guarantee expected HECM advances and supports the loan’s non-recourse protection if the balance eventually exceeds the home’s value. FHA mortgage insurance is fundamental to the HECM program. The applicable annual MIP is also part of the growth applied to unused line-of-credit capacity.

Choose a Time Period to See Your Projection

Projected amounts are shown as of the end of the selected year.

Voluntary Payment Being Tested

$ / month

Voluntary Dollars Paid per Week

$ / week

Weekly dollars are converted to a monthly equivalent using 52 weeks ÷ 12 months. The projection still applies payments monthly, so actual results can vary with payment timing.

Compare the Results

Loan Balance

Available Line of Credit

Starting Point

Loan Balance

Available Line of Credit

With Normal HECM Growth

Loan Balance

Available Line of Credit

Projected: If You Make Payments

Loan Balance

Available Line of Credit

Effect of Voluntary Payments

Loan Balance

Available Line of Credit

The available line of credit represents increased borrowing capacity, not cash on deposit or interest earned on an account.

These projections are estimates, not exact future amounts. They assume no future withdrawals from the line of credit and use the information entered above to illustrate how the HECM may change over time. Actual adjustable interest rates, future withdrawals, payment timing, servicing activity, and other changes will affect the results.

A withdrawal would increase the loan balance, reduce the available line of credit, and change the amounts shown for later years.

Putting the Results in Perspective

Approximate Break-Even Payment

—

For comparison

A Long-Term Care Perspective See one example of how HECM borrowing capacity can fit into planning for later-life care.

Federal estimates suggest that about 70% of people who reach age 65 will need some type of long-term care services and supports during their remaining years.

For comparison, the long-term care insurance example shown here begins at age 65 and is shown at age 80. The HECM example uses the same 15-year period. HECM eligibility can begin at age 62.

Long-Term Care Insurance Example, One Woman, Using the AALTCI Price Index Example: About $441 per month at age 65 for $165,000 of initial benefits with 3% compound benefit growth. At age 80, that benefit would grow to about $257,065 of potential long-term care insurance benefits.

The advantage of long-term care insurance is that it can provide a substantial benefit pool from the start, and that benefit can grow over time. The tradeoff is that premiums generally must continue to be paid, may increase, and benefits are available only when the policy’s eligibility requirements are met.

HECM Example, One-Person Household: .

The advantage of a HECM line of credit is flexibility. Monthly principal and interest payments are not required, and voluntary payments can reduce the HECM loan balance while restoring line-of-credit borrowing capacity. Available line-of-credit funds are not restricted to long-term care or any other particular use. HECM qualification does not require medical underwriting or a qualifying health condition, and using available line-of-credit funds does not require meeting a care-related eligibility requirement. Unlike insurance benefits, money drawn from the HECM line of credit is borrowed and increases the loan balance, but it does not create a required monthly principal and interest payment. The amount that can be drawn at any time is limited to the line-of-credit borrowing capacity then available.

Carry the comparison five years farther, to age 85: the long-term care benefit would have grown to about $298,500, while the policyholder would generally still be paying premiums to keep the policy in force. If the same voluntary HECM payment continued, projected available line-of-credit borrowing capacity at year 20 would be —.

The HECM figure uses the information entered above and shows the full projected available line of credit at year 15, not just the amount restored by voluntary payments. It is projected future borrowing capacity, not money available today. That is intentional because the point is to compare resources that could be available for later-life needs.

These are different planning tools, not equivalent products. This comparison is not an attempt to sell or recommend long-term care insurance. It is simply another way to look at preparing for later-life needs. Before making a decision, talk with a qualified financial professional, a licensed long-term care insurance professional, and your Reverse Mortgage Professional about what fits your circumstances.

Sources: 2025 AALTCI Long-Term Care Insurance Price Index and U.S. Administration for Community Living, How Much Care Will You Need? . The age-65 single-woman figure shown here comes from AALTCI’s published 2025 table for a Select Health applicant in Illinois. This example is illustrative, not an insurance quote. Actual premiums, benefits, underwriting, and policy terms vary.

Here’s the Takeaway

Making voluntary payments can work on both sides of a HECM. They can reduce the loan balance that future interest and MIP are added to, while restoring line-of-credit borrowing capacity that can continue to grow if it remains unused.

That combination is unusual. A HECM does not require monthly principal and interest payments, yet unused line-of-credit borrowing capacity can continue to grow. That can create a substantial financial reserve for later years.

Long-term care is one example of why future borrowing capacity can matter. If that is part of your planning, open A Long-Term Care Perspective above for a closer look at how a HECM line of credit compares with one long-term care insurance example.

If you never need it, fantastic. The borrowing capacity can remain available and continue to grow. If you do need it someday, for care, a major repair, an emergency, or simply an unexpected change in life, you may be very glad it is there.

Dan DeVere

A Few Things to Know About Voluntary Payments

Monthly payments are optional. A HECM does not require monthly principal and interest payments, but you can choose to make voluntary payments at any time.

When the HECM becomes due. Monthly principal and interest payments are not required on a HECM. The loan generally becomes due when the last surviving borrower dies, the home is sold or transferred, or it is no longer the borrower’s principal residence. Borrowers must continue to meet the loan obligations, including property taxes, homeowners insurance, applicable property charges, and maintaining the home. A prolonged medical absence and eligible non-borrowing spouse protections can involve special rules.

Keep at least a $500 loan balance if you want to keep the HECM open. Do not make a payment that would reduce the loan balance below $500 without first confirming the exact amount with your servicer. This calculator uses $500 as a practical safety cushion; it is not a HUD-required minimum. Paying the HECM in full closes the loan and ends access to any remaining line-of-credit borrowing capacity.

Keeping the HECM open can preserve a valuable source of future borrowing capacity for long-term care, in-home help, home repairs, emergencies, income shortfalls, or other needs later in life.

Tax note: A voluntary payment may cause some previously accrued reverse-mortgage interest to be paid after MIP and any servicing fees are applied under the HECM Note. Whether interest actually paid is deductible depends on how the HECM proceeds were used and your individual tax situation. Check with your CPA or tax adviser before making a payment for tax reasons.

Important Assumptions

HECM borrowers must continue to meet the loan obligations, including living in the home as their principal residence, keeping property taxes and homeowners insurance current, paying applicable HOA dues, and maintaining the property.

The available line of credit is borrowing capacity. Its growth is not interest earned and is not money in a deposit account.
These calculations assume no new draws, no property-charge advances, and no repair or LESA activity. This app is intentionally designed to show the basic mechanics and the potential impact of making voluntary payments. A Reverse Mortgage Professional can model more complex scenarios that include future draws, emergency expenses, or other planned uses of the line of credit.
This is an educational estimate only for an adjustable-rate HECM with an available line of credit. It is not for a fixed-rate HECM and is not a servicer statement, financial plan, tax opinion or legal advice.
For these projections, the rate assumption you select is held constant for the chosen period. You may use the Current or Estimated Note Rate, an Expected Rate from a new-loan illustration, or another what-if assumption. The app does not predict future adjustable rates; the actual Note Rate may rise or fall as the index changes.
The calculator uses the annual FHA MIP selected above. FHA currently charges 0.50% on new HECMs; some older HECMs use 1.25%.
The calculator includes the separate monthly servicing fee entered above, if any. Under current HUD rules, the maximum separate monthly servicing fee is $35 for a monthly-adjusting HECM and $30 for an annually adjusting HECM.
The model assumes any additional borrowing capacity created by a voluntary payment is made available through the existing line of credit. Actual payments are applied by the servicer in accordance with the HECM Note, generally in the order of MIP, servicing fees, interest, then principal. If a partial prepayment makes additional Principal Limit available on an adjustable-rate HECM, the borrower may have choices about how that additional amount is used.
To keep this illustration focused on preserving an open HECM line of credit, the calculator retains a $500 loan balance rather than projecting the balance to zero. This is a calculator convention, not a HUD/FHA or servicer-recommended minimum. Once that point is reached, it applies only enough of the entered voluntary payment to offset new monthly charges and maintain the illustrated $500 balance. Confirm exact payment instructions and servicing treatment with the loan servicer.
Actual results can differ because of rate changes, exact payment dates, partial-month accruals, servicing practices, fees, advances and the specific terms of the HECM.

Federal references: 24 CFR § 206.3 (principal limit growth), 24 CFR § 206.25 (line of credit growth and monthly interest/MIP), 24 CFR § 206.209 (prepayment), and HUD's HECM Adjustable Interest Rate Model Loan Agreement.
24 CFR Part 206 | HUD Handbook 4000.1 | HUD HECM ARM Model Loan Agreement

Dan DeVere

A Full-Service Mortgage Loan Officer

Dignified Reverse

Dignified Home Loans, LLC

NMLS #295207

661-400-5040

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For informational and educational purposes only. This calculator is an illustration. It is not a loan offer, commitment, approval, financial advice, tax advice, or legal advice, and it does not replace your loan documents or servicer statement.

Actual HECM balances, interest rates, FHA mortgage insurance charges, available proceeds, payment application, line-of-credit availability, and future results can differ from the estimates shown here. Actual loan information and available proceeds are determined by the loan documents and servicer.

HECM borrowers remain responsible for meeting the requirements of the loan, including occupying the home as their principal residence, keeping property taxes and homeowners insurance current, paying applicable HOA dues, and maintaining the property.

These materials are not from HUD or FHA and were not approved by HUD or a government agency.

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Credit and collateral are subject to approval. Additional restrictions may apply. Terms and conditions apply. This is not a commitment to lend. Programs, rates and conditions are subject to change without notice.

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