How does the reverse mortgage line of credit grow over time?
THE SHORT ANSWER
On an adjustable-rate HECM, the part of your line of credit you haven't used grows each month. It grows at the same rate the loan balance would: the loan's interest rate plus the 0.5% annual mortgage insurance premium. It's growth in what you can borrow, not an investment return, and it can't be frozen or cancelled by the lender as long as you meet the loan terms.
What this means for you
Money you don't use now can mean more available later.
- Growth only applies to the unused part of the line.
- You pay no interest on money you haven't drawn.
- Available on adjustable-rate HECMs, not the fixed-rate lump-sum option.
A growing safety net for future care costs.
- Some families open a line early and leave it untouched for later needs.
- Draws are loan proceeds, not income.
A standby credit line can buffer sequence-of-returns risk.
- Research in the Journal of Financial Planning has examined drawing from the line after down markets instead of selling investments.
- Growth compounds monthly on the unused balance.
- Model rate scenarios; growth rises and falls with the variable rate.
How the math works
Each month, the unused credit line grows by the same rate charged on the loan balance. If the loan's rate is 6% and the annual mortgage insurance premium is 0.5%, the unused line grows at about 6.5% a year, compounded monthly. When rates rise, the growth rate rises too.
Try your own numbers with the free calculator linked on this page.
What it isn't
The growth is borrowing power, not cash in an account. Whatever you eventually draw becomes part of the loan balance and accrues interest from then on.
SOURCES
- HUD Handbook 4000.1, HECM payment options
- Journal of Financial Planning research on standby reverse mortgages
Rules change. This page is general education, not advice for your situation. Talk with a licensed professional before deciding.