How the Growth Works
HUD's rule, what the growth is not, and what keeps adding up.
Each answer below follows the wording in HUD's regulation and handbook or CFPB's consumer pages, linked under each one.
How does HUD calculate the growth?
Under HUD's HECM rule, the principal limit increases each month at one-twelfth of the mortgage interest rate in effect at that time, plus one-twelfth of the annual mortgage insurance rate. On an adjustable-rate HECM, that increase can be made available to you each month, and the unused line of credit grows at the same rate. Because an adjustable rate can change, the pace of the growth can change with it.
24 CFR 206.3, definition of principal limit (eCFR, current text) · 24 CFR 206.25(g), line of credit growth (eCFR, current text)
Does this apply to a fixed-rate HECM?
No. HUD's rule says that although a fixed-rate HECM's principal limit keeps increasing, no further funds may be made available for you to draw after closing. Later draws require an adjustable-rate HECM.
24 CFR 206.3, definition of principal limit (eCFR, current text)
Can I draw the growth right away?
Not always. On an adjustable-rate HECM, total draws during the first 12 months after closing are capped at an initial disbursement limit, so some of the credit may not be available until that period ends.
24 CFR 206.19, payment options and first-12-month limit (eCFR, current text) · HUD final rule, Strengthening the HECM Program (Federal Register, January 19, 2017)
Is the growth interest I earn?
No. HUD's counseling handbook tells counselors not to say that HECM credit lines "earn interest," because the growth is simply more access to borrowing, comparable to a higher credit limit on a credit card. Nothing is paid to you unless you draw it, and anything you draw is added to your balance. HUD also cautions that proprietary, non-FHA reverse mortgages may have a lower growth rate or none at all.
HUD Housing Counseling Handbook 7610.1, page 127 (published March 2026)
Am I charged interest on credit I have not drawn?
No. With a line of credit, you pay interest only on money you use. Leaving credit unused means no interest on that undrawn amount.
CFPB: Considering a reverse mortgage? (brochure dated September 2022)
Why can my balance still grow?
Ongoing costs are added to the loan balance each month: interest, the annual mortgage insurance premium and any servicing fees. Each month you are charged on top of what was added the month before. Upfront costs paid with loan money, rather than cash, also start the balance and leave less available to you. Compare the written costs for each payout option before you choose one.
CFPB: How much does a reverse mortgage loan cost? (reviewed May 28, 2024)
What do I still have to do while the credit grows?
Pay your property taxes and homeowners insurance on time, plus flood insurance, condominium or homeowners association fees and other property charges where they apply. Keep the home in good repair and live in it as your principal residence. If you do not meet these obligations, the lender can foreclose on the home.
CFPB: Does the lender own my home? (reviewed July 11, 2022) · CFPB: Reverse mortgages key terms (page last modified December 28, 2022)
