Quick Answer
A reverse mortgage amortization schedule shows the loan balance increasing over time rather than decreasing, because no monthly payments are made and interest plus the ongoing mortgage insurance premium are added to the balance each month. The balance compounds, so it grows faster in later years. Your remaining equity is the home's value minus that growing balance — so equity depends on both how fast the balance rises and how the home's value changes. Because the HECM is non-recourse, you can never owe more than the home is worth when the loan is repaid.
Why a Reverse Mortgage Amortizes Backward
On a forward mortgage, each payment covers the month's interest and chips away at the principal, so the balance shrinks. On a reverse mortgage you make no required monthly payments, so each month's interest is added to the balance instead of being paid off. The mortgage insurance premium is added too. Next month, interest is charged on a slightly larger balance — that compounding is why the schedule rises and why it accelerates in later years.
What Gets Added to the Balance Each Month
Three things cause a reverse mortgage balance to grow over time:
- Interest on the money you have drawn, charged at your loan's rate.
- The ongoing FHA mortgage insurance premium (MIP), charged annually on the balance.
- Any new funds you draw — for example, monthly tenure payments or line-of-credit withdrawals.
If you draw less, the balance grows more slowly. A borrower who takes a small line of credit and leaves it untouched will see a very different schedule from one who takes a large lump sum on day one.
An Illustrative Year-by-Year Example
Here is a simplified, illustrative example for a homeowner who takes a $150,000 lump sum, assuming a combined interest-plus-MIP rate of about 7% and no further draws. These figures are rounded for teaching and are NOT a quote, a projection of your loan, or a guarantee — your actual numbers depend on your rate, draws, and FHA rules.
- 1Start: balance about $150,000.
- 2Year 1: balance about $160,500.
- 3Year 3: balance about $183,800.
- 4Year 5: balance about $210,400.
- 5Year 10: balance about $295,100.
- 6Year 15: balance about $413,900.
- 7Year 20: balance about $580,500.
Notice how the yearly increase gets larger over time even though nothing new is borrowed — that is compounding at work.
How Your Home Equity Changes
Your equity at any point is simply the home's value minus the loan balance. Because the balance is rising, equity tends to shrink over time — but the home's value can also rise. If the home appreciates faster than the balance grows, you may keep or even build equity; if it appreciates more slowly, equity declines. This is why looking at the schedule alongside a realistic view of home values matters more than looking at the balance alone.
The Non-Recourse Protection
A crucial difference from a forward loan: the HECM is non-recourse. No matter how high the balance climbs, when the loan is repaid — usually when the home is sold after the last borrower leaves — neither you nor your heirs will ever owe more than the home is worth at that time. If the balance has grown past the sale price, FHA insurance covers the difference. Your other assets and your heirs' assets are protected.
Using the Schedule to Make a Decision
The amortization schedule is a planning tool, not a reason for fear. Drawing less, choosing a line of credit instead of a large lump sum, or making voluntary payments (which are always allowed) all slow the balance's growth. The best way to see a schedule built around your own age, home value, and draw plan is to ask for one. Miguel A. Vazquez, NMLS #401212, at Reverse Mortgage Plus can prepare a personalized illustration and explain it in English or Spanish.
