LESA Calculator
If the financial assessment calls for a Life Expectancy Set-Aside, or you voluntarily opt for one, part of your principal limit is reserved to pay future property taxes and homeowners insurance for as long as you live in the home. That money isn't lost — but it can only be used to pay future property taxes and insurance as they become due. If that balance runs out while you’re living in the home, those annual costs are back on you to pay.
Estimate your Life Expectancy Set-Aside (LESA)
Use your age within 6 months of closing.
Homeowners insurance annual premium amount. HOA dues are not covered by a LESA.
Only where flood insurance is required. Leave at $0 if it isn't.
Loan assumptions
6.000% · 13 yrsThe “expected” interest rate is used to determine how much is needed to reserve in your LESA balance. Any funds in your available LESA will continue to increase by your current annual interest rate plus 0.50%. Be sure to call or text Chad Peck to make certain you are using the correct expected rate, as it can change from week to week depending on what the 10-Year CMT index did last week. Track it below.
What a set-aside is
Money reserved to keep the loan in good standing.
Every reverse mortgage requires you to stay current on property taxes and homeowners insurance. If the financial assessment suggests that might be a strain, the lender reserves part of your principal limit to cover those bills — and pays them for you as they come due.
How the number is built
Four inputs, two of them from published tables.
- Your annual property chargesProperty taxes plus hazard and flood insurance. HUD adds a 20% factor to that total to allow for tax and insurance increases over the years, then divides it into monthly amounts.
- Life expectancyTaken from the table at 12 CFR Part 1026, Appendix L — the same figure used for Truth in Lending disclosures. At 72 it's 13 years; at 80 it's 9.
- The growth rateThe expected rate plus the 0.5% ongoing FHA insurance premium. Because the reserved money grows, less has to be set aside today than the bills will eventually total.
What it does and doesn't cover
Worth knowing before you plan around it.
- CoveredProperty taxes, hazard insurance, and flood insurance where required.
- Not coveredHOA dues, condominium fees, and ground rents stay your responsibility, whether or not a LESA exists.
- It reduces what you can borrowA set-aside comes out of the principal limit, so on a purchase you bring more cash to closing, and on a refinance less is available to you.
- It can run outIf the set-aside is exhausted, paying the taxes and insurance is back to you. It's a reserve, not a guarantee for life.
Your next step
Find out whether you'd need one at all.
Plenty of borrowers never need a set-aside. Whether you do comes out of the financial assessment — credit history, residual income, and how you've handled property charges in the past. Chad can walk you through it in a few minutes.