FHA Mortgage Insurance Premiums on a Reverse Mortgage
What They Cost — and What You Get for Them
JP Dauber · Licensed HECM Specialist
NMLS# 386298 · Published May 29, 2026
What are the two HECM mortgage insurance premiums?
Upfront MIP: 2%
Charged at closing on the lesser of the appraised value or the FHA lending limit ($1,249,125). For a $400,000 home, that's $8,000. Financed into the loan — not paid out of pocket.
Annual MIP: 0.50%
Charged on your outstanding loan balance. Accrues monthly alongside interest. If your balance is $100,000, the annual MIP adds about $500/year (or ~$42/month) to the balance.
What do the premiums pay for?
MIP isn't just a fee — it funds the specific protections that make HECMs unique:
Non-recourse guarantee
If the loan balance exceeds the home's value when the loan comes due, FHA insurance covers the difference. You and your heirs owe nothing beyond the home's market value. This is the core HECM protection.
Guaranteed line of credit
Your HECM line of credit can never be frozen, reduced, or canceled — even if your home loses value. FHA insurance backs this guarantee.
Lender protection = your protection
FHA insurance also protects lenders against losses, which is what makes them willing to offer HECMs without monthly payments or income requirements in the first place.
How does MIP connect to credit line growth?
Here's something most people don't realize: the annual MIP is part of the formula that determines your credit line growth rate. The growth rate equals your interest rate plus the 0.50% annual MIP. So the insurance premium you pay on your balance is also the mechanism that makes your unused credit line grow.
It's an unusual dynamic — you're paying for growth. But the net effect is positive: your available borrowing power increases over time at a rate that includes the MIP cost.
A real example
MIP on a $400,000 home
Upfront MIP: 2% × $400,000 = $8,000 (financed into loan)
Annual MIP year 1: If you drew $100,000 at closing, 0.50% × $100,000 = $500/year (~$42/month added to balance)
Annual MIP year 5: If your balance has grown to $140,000, 0.50% × $140,000 = $700/year (~$58/month added to balance)
The annual MIP grows as your balance grows, since it's a percentage of the outstanding amount. If you draw less, the MIP is smaller.
The cost of the guarantee
FHA mortgage insurance is a mandatory cost of every HECM — but it's not an empty fee. It funds the non-recourse guarantee, the credit line guarantee, and the overall program structure that makes reverse mortgages possible. The upfront 2% is financed into the loan, and the annual 0.50% accrues alongside interest. For the protections it provides, most borrowers consider it well worth the cost.
Want to see exactly what MIP would look like on your loan? Run the calculator or reach out for a detailed breakdown.
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