How much does a reverse mortgage's loan balance grow over 15 years?

On a $250,000 HECM draw at 6.5% interest plus 0.5% ongoing annual mortgage insurance premium (a 7% combined annual growth rate), the loan balance compounds to roughly $689,758 after 15 years — nearly 2.8x the original draw.

What are the upfront costs of a HECM reverse mortgage?

An origination fee — min($6,000, max($2,500, 2% of the first $200,000 of home value plus 1% of the rest)) — plus an initial Mortgage Insurance Premium (MIP) of 2% of the appraised home value. On a $500,000 home, that's a $6,000 origination fee (capped) plus $10,000 initial MIP, or $16,000 before a dollar of the loan reaches the borrower.

Is a reverse mortgage riskier than downsizing for building net worth?

For net worth specifically, usually yes over a long horizon — the loan balance compounds against the home's value while the borrower's own contribution to that growth is zero, whereas downsizing converts equity into invested cash that compounds in the borrower's favor. The tradeoff is that downsizing requires actually moving, which a reverse mortgage does not.

Can a reverse mortgage borrower ever owe more than the home is worth?

No — a HECM is federally insured and non-recourse, meaning neither the borrower nor their estate ever owes more than the home's value at the time the loan comes due, even if the loan balance has grown past that value.

A $250K Reverse Mortgage Leaves $89K of Home Equity After 15 Years — Downsizing Leaves $810K

We ran a common scenario through the calculator: a $500,000 home, a $250,000 HECM (reverse mortgage) draw, and a 15-year horizon. The reverse mortgage path leaves about $89,226 of home equity at the end. A downsizing path — selling the same home, buying a $300,000 replacement, and investing what’s left — grows to roughly $810,413 in total net worth over the same 15 years. That’s a $721,188 gap, driven almost entirely by one thing: compounding loan interest versus compounding investment returns.

Two very different compounding directions

	Reverse mortgage (stay put)	Downsizing (sell and move)
Upfront cost	$6,000 origination fee + $10,000 initial MIP	$35,000 selling costs (7% of $500K)
What compounds	Loan balance grows at 6.5% + 0.5% MIP	Leftover cash invested at 5%
After 15 years	Home value $778,984 − loan balance $689,758	$343,023 invested + $467,390 new home value
Net worth at horizon	$89,226	$810,413

The reverse mortgage lets the loan balance compound against the borrower every single year, while home appreciation works in the borrower’s favor at the same time — the net result depends entirely on which growth rate wins. In this scenario, the loan’s 7% combined growth rate outpaces the home’s 3% appreciation rate by a wide enough margin that the loan balance nearly overtakes the home’s value by year 15. Downsizing instead converts the equity into cash that compounds in the borrower’s favor from day one, with no offsetting liability growing against it.

Why a reverse mortgage still makes sense for some households

None of this makes a HECM a bad product — it makes it a different tool for a different job. A HECM is non-recourse (federally insured, so the borrower never owes more than the home is worth) and lets someone stay in a paid-off home they don’t want to leave while accessing equity for healthcare costs, home modifications, or simply supplementing income. The net-worth math above assumes the goal is maximizing what’s left at the end of the horizon — for someone whose goal is staying in a specific home for medical, family, or emotional reasons, that’s a different optimization entirely, and this calculator isn’t the right lens for it.

Where this framework doesn’t apply

You have strong reasons to stay in your current home. Aging in place near familiar doctors, community, and existing accessibility modifications has real value this net-worth comparison doesn’t capture.
You want to leave the home to heirs. A reverse mortgage reduces the equity your estate inherits — heirs must repay the loan or sell to satisfy it. Downsizing converts equity into cash and a smaller home, both fully part of the estate.
You only need a small, short-term cash infusion. A HELOC or cash-out refinance may carry lower ongoing costs than a HECM’s origination fee and MIP structure for a modest, temporary need.
You wouldn’t actually invest the downsizing proceeds. This comparison assumes 100% of leftover cash gets invested — a household that would spend most of it instead won’t see the net-worth gap shown here.

What to actually do

Run the numbers with your actual home value, target loan draw, and a realistic replacement-home price if downsizing is even on the table.
Complete HUD-required HECM counseling before proceeding with a reverse mortgage — it’s mandatory and free, and a counselor will walk through your specific numbers.
If you do want a HECM, compare a smaller draw (just enough for the actual need) against the full available amount — remaining equity scales inversely with how much you draw.
If downsizing wins on net worth, weigh it honestly against the real cost of moving — the true cost of a move often runs higher than people expect and should be netted against the projected gain.
Revisit the comparison if your health, family situation, or the local housing market changes meaningfully — neither path is a one-time decision that shouldn’t be revisited.

Open the Reverse Mortgage vs Downsizing Calculator → and run your own home value, loan amount, and horizon.