What Is MIP on a Reverse Mortgage: 2% Upfront and 0.5% Annual

The MIP on a reverse mortgage is the FHA mortgage insurance premium charged on a Home Equity Conversion Mortgage (HECM). It comes in two parts: an upfront premium of 2% of the maximum claim amount paid at closing, and an annual premium of 0.5% of the outstanding loan balance that accrues monthly for the life of the loan.¹ Those premiums fund the federal insurance that gives a HECM its signature protections, including the guarantee that you and your heirs will never owe more than the home is worth.

The Maximum Claim Amount Drives Both Charges

Both MIP charges are calculated from the maximum claim amount (MCA), so the number matters. The MCA is the lesser of your home’s appraised value or the national FHA lending limit in effect when your case number is assigned.² For 2026, the national HECM lending limit is $1,249,125 for case numbers assigned on or after January 1, 2026.³

A $400,000 appraisal produces a $400,000 MCA because it falls below the limit. A $1,500,000 appraisal produces an MCA capped at $1,249,125. The appraised value controls up to the ceiling; above it, the ceiling controls.

Upfront MIP: 2% of the MCA

At closing, the lender pays HUD a one-time upfront MIP equal to 2% of your maximum claim amount. The regulation caps this premium at 3% of the MCA, but HUD has set the actual rate at a flat 2% since October 2017.⁴⁵

A few worked examples:

Home appraised at $300,000: MCA is $300,000, so the upfront MIP is $6,000.
Home appraised at $500,000: MCA is $500,000, so the upfront MIP is $10,000.
Home appraised at $1,400,000: MCA is capped at $1,249,125, so the upfront MIP is $24,983.

The 2% rate applies no matter how much you draw in the first year and no matter which payment option you pick. That flat rate replaced an earlier structure that charged different upfront rates depending on the initial disbursement.⁵

Annual MIP: 0.5% of the Loan Balance, Compounded Monthly

On top of the upfront charge, HUD requires an annual MIP equal to 0.5% of your outstanding loan balance.¹ One-twelfth of that amount is added to your balance each month, and the charge continues for the entire life of the loan.⁴

Because the loan balance grows over time as interest, servicing fees, and prior MIP charges accumulate, the dollar amount of the annual premium grows with it. A borrower with a $200,000 balance owes roughly $83 a month in MIP ($200,000 × 0.5% ÷ 12). If that balance climbs to $300,000 a few years later, the monthly MIP accrual rises to about $125. Over a 15- or 20-year loan, cumulative annual MIP can add tens of thousands of dollars to what is eventually owed.

How You Actually Pay It

Most borrowers never write a check for MIP. The upfront premium is typically financed into the loan balance at closing, which reduces the cash available to you from the reverse mortgage.⁶ You can pay it in cash at closing if you prefer, but financing it is the common choice.

The annual MIP is added to your loan balance each month as it accrues.¹ No separate bill ever arrives. The convenience is real, but so is the trade-off: your equity shrinks steadily, and the MIP costs ultimately come out of whatever you or your heirs receive when the home is sold.

What the Premium Actually Buys

MIP payments flow into the federal Mutual Mortgage Insurance Fund, which backs two protections that set a HECM apart from a conventional loan.²

Non-Recourse Guarantee

A HECM is a non-recourse loan. Neither you nor your heirs are personally responsible for repaying more than the home is worth. If the loan balance grows to $350,000 but the home sells for $280,000, the insurance fund covers the $70,000 shortfall. The lender cannot pursue your estate, your other assets, or your heirs for the difference.⁷ Heirs who want to keep the home can also satisfy the debt by paying 95% of the current appraised value when the balance exceeds what the home is worth.

Lender Backstop

If your servicer goes out of business or stops making scheduled payments to you, HUD is authorized to step in and make those payments directly.⁸ HUD investigates complaints about late payments and, if it finds the servicer is unable or unwilling to pay, takes over the obligation. Your monthly payments or line-of-credit access continues regardless of the lender’s financial health.

Keeping the Insurance in Force

MIP protections stay in place only as long as you meet your borrower obligations. A reverse mortgage requires no monthly loan payment, but you remain responsible for several ongoing costs:

Property taxes and special assessments, paid on time.
Hazard insurance on the home, plus flood insurance where it applies.
Reasonable upkeep of the property.
Any HOA or condo association dues.

These obligations are set out in the HECM regulations, and falling behind on them can cause the loan to become due and payable immediately.⁹ During underwriting, the lender runs a financial assessment to judge whether you can carry these costs on your own. If there is concern, the lender may set aside a portion of your loan proceeds, called a Life Expectancy Set Aside, specifically to pay taxes and insurance.

You are also prohibited from enrolling in a real estate tax deferral program or allowing liens that are not subordinate to the HECM to attach to the property.²

Proprietary Reverse Mortgages Do Not Charge MIP

Proprietary or “jumbo” reverse mortgages are private products that FHA does not insure. They carry no upfront or annual MIP, which can save a borrower with a high-value home thousands of dollars at closing and over the life of the loan. There is no federal insurance fund behind them, however, so they do not come with the government-backed non-recourse guarantee or the lender backstop that keeps your payments flowing if the servicer fails. Proprietary products also lack a standardized counseling requirement, federally mandated limits on origination fees, and uniform disclosure rules. If your home’s value exceeds the HECM lending limit, weigh the MIP savings against the protections you give up.

Tax Treatment

The federal itemized deduction for mortgage insurance premiums has expired, so neither upfront nor annual MIP is currently deductible on your return. The IRS treats mortgage insurance premiums as a charge for a service rather than as mortgage interest. Your lender may still report the premiums on Form 1098, but no deduction is available unless Congress reinstates it. Interest that accrues on a reverse mortgage is generally not deductible until it is actually paid, which for most borrowers means the point when the loan is settled through a sale or payoff.¹⁰

1
Consumer Financial Protection Bureau. How Much Does a Reverse Mortgage Loan Cost?
2
eCFR. 24 CFR Part 206 – Home Equity Conversion Mortgage Insurance
3
U.S. Department of Housing and Urban Development. FHA Lenders Single Family
4
eCFR. 24 CFR Part 206 Subpart C – Mortgage Insurance Premiums
5
U.S. Department of Housing and Urban Development. FY 2025 Actuarial Review of the MMIF – HECM Loans
6
Consumer Financial Protection Bureau. href=”https://www.consumerfinance.gov/ask-cfpb/how-much-does-a-reverse-mortgage-loan-cost-en-237/” target=”_blank” rel=”noopener”>How Much Does a Reverse Mortgage Loan Cost?
7
eCFR. 24 CFR Part 206 – Home Equity Conversion Mortgage Insurance – Section 206.27
8
eCFR. 24 CFR 206.121 – Commissioner Authorized to Make Payments
9
eCFR. 24 CFR 206.205 – Property Charges
10
Internal Revenue Service. Publication 936 – Home Mortgage Interest Deduction