At a glance
- Age
- 62 and older
- Insured by
- FHA (HUD)
- Counseling
- Required
Educational overview, not a loan offer. Requirements vary by lender and borrower.
Overview
A Home Equity Conversion Mortgage (HECM) is an FHA-insured reverse mortgage. Homeowners 62 and older can receive funds as a lump sum, a line of credit or monthly payments. The loan is repaid when the home is sold or is no longer the primary residence.
Borrowers must keep paying property taxes, insurance and upkeep. Every borrower on the loan must be 62 or older, though a spouse who is not a borrower may be younger. HUD-approved counseling is required before applying.
How a HECM works
A Home Equity Conversion Mortgage is a loan against your home that you do not repay month by month. Instead, interest, mortgage insurance premiums and servicing charges are added to the balance, which grows over time while your equity shrinks. The loan becomes due when the last borrower dies, sells or no longer lives in the home as a principal residence, or if the loan's obligations are not met.
The amount available, called the principal limit, depends on the age of the youngest borrower or eligible non-borrowing spouse, the expected interest rate, and the home's value up to FHA's maximum claim amount. Any existing mortgage must be paid off from the proceeds or your own funds at closing, and required costs come out first.
A HECM is non-recourse: the lender can collect only through the home, and neither you nor your heirs owe more than it is worth. FHA insurance covers any shortfall.
See also
Who a HECM can fit
A HECM is meant for homeowners 62 and older who plan to stay in their home and want to turn part of its value into cash without a monthly mortgage payment.
It tends to be a poor fit for someone who expects to move soon, cannot keep up with property charges, or wants to leave the home to heirs without a loan against it.
Situations where a HECM comes up:
- A retiree with substantial equity who wants to pay off a remaining mortgage and free up monthly cash flow.
- A homeowner who wants a line of credit for future health or home costs, drawing only as needed.
- A couple downsizing who use a HECM for Purchase to buy a home better suited to aging in place.
- An owner who can keep paying property taxes, insurance and upkeep for the long term.
HECM eligibility: age, occupancy and counseling
HUD sets the core rules, and lenders apply them along with their own requirements. Owning the home outright is not required; the HECM itself can pay off a current mortgage.
The core requirements:
- Every borrower must be at least 62. A younger spouse can be named as an eligible non-borrowing spouse.
- The home must be the principal residence of each borrower, and of any eligible non-borrowing spouse, at closing.
- Every borrower, any non-borrowing spouse and any other owner on title must complete counseling with a HUD-approved HECM counselor before the application moves forward.
- Existing liens must be paid off at or before closing.
- The lender completes a financial assessment of credit history, cash flow and residual income.
- Borrowers must be U.S. citizens, lawful permanent residents or citizens of the freely associated states named in the program rules.
Credit and the financial assessment
There is no monthly mortgage payment, but HUD still requires lenders to look at whether the loan is sustainable for you. The financial assessment reviews your credit history for willingness to meet obligations, and your cash flow and residual income for the capacity to keep paying property taxes, insurance and other charges. Extenuating circumstances and compensating factors can be considered.
If the assessment shows a risk of missed property charges, the lender can require a Life Expectancy Set-Aside, or LESA, which reserves part of the principal limit to pay taxes and insurance. A LESA reduces the money available to you, but it helps keep those obligations current, since unpaid property charges can make the loan due.
Eligible homes and occupancy for a HECM
Eligible homes include single-family homes, two- to four-unit properties where you live in one unit, and condominium units and manufactured homes that meet FHA's requirements. The property must meet FHA's minimum property standards; if repairs will be finished after closing, part of the principal limit is set aside to pay for them.
Occupancy is ongoing. You certify each year that the home is still your principal residence, and HUD's disclosures ask you to tell the servicer about absences of more than two months. If no borrower lives there for more than 12 consecutive months because of physical or mental illness, the loan can become due unless another borrower still lives in the home.
HECM maximum claim amount and your home's value
For 2026, FHA's HECM maximum claim amount is $1,249,125 for case numbers assigned on or after January 1, 2026, and it applies in all areas. The maximum claim amount is not a loan amount: it is the most home value FHA will use when calculating your principal limit. If your home is worth less, its appraised value is used, and on a HECM for Purchase the lower of the price and the value applies.
HUD updates the limit each year. Homes worth more than the limit are still eligible, but the extra value does not increase the money available. Some private lenders offer proprietary reverse mortgages, which are not FHA-insured and are typically designed for higher-value homes.
What a HECM can offer homeowners 62 and older
For the right household, a HECM offers features no forward mortgage does:
- No monthly principal and interest payment is required while you meet the loan's obligations.
- Several ways to receive funds, including a line of credit whose available amount can grow over time.
- Non-recourse protection: you and your heirs never owe more than the home is worth, though the growing balance reduces the equity left for them.
- Independent counseling is required before you apply, so you hear about alternatives and costs first.
- Protections for an eligible non-borrowing spouse who meets HUD's conditions.
- A HECM for Purchase lets you buy and take out the reverse mortgage in one transaction.
Ongoing costs, draw limits and spouse protections
A HECM can be expensive compared with many forward loans, especially if you stay only a short time. Costs include an upfront and an annual FHA mortgage insurance premium, origination and third-party closing costs, and possibly servicing fees, most of which can be financed into the balance. Because interest and premiums compound on a growing balance, the equity left for you or your heirs declines over time.
- Property taxes, insurance, association dues and upkeep remain your responsibility, and falling behind can make the loan due and lead to foreclosure.
- HUD limits how much can be drawn in the first 12 months.
- A spouse who is not named as an eligible non-borrowing spouse at closing does not get the deferral protection.
- Moving into long-term care for more than a year can end the loan if no other borrower lives in the home.
- The CFPB warns about contractors who push a reverse mortgage to pay for repairs.
Talk it through with Ruben
HECM compared with a HELOC and a cash-out refinance
Homeowners 62 and older often compare a HECM with a HELOC or a cash-out refinance. The biggest difference is the payment: forward loans require regular payments, while a HECM requires none as long as you live in the home and meet its obligations. That flexibility is paid for through a rising balance and FHA premiums.
A HECM also cannot be assumed by a buyer. Heirs who want to keep the home must pay off the loan, but HUD rules let them settle it for the lesser of the balance or an amount HUD sets from the home's current appraised value. Counseling covers these differences in detail before you apply.
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| Feature | HECM reverse mortgage | HELOC | Cash-out refinance |
|---|---|---|---|
| Monthly mortgage payment | None required | Required | Required |
| Balance over time | Grows | Depends on draws and payments | Declines with payments |
| Counseling | Required, HUD-approved | Generally not required by federal law | Generally not required by federal law |
| Age rule | 62 and older | None | None |
| Repayment trigger | Death, sale, move-out or default | Set schedule | Set schedule |
| Owed beyond home value | Never (non-recourse) | Possible, depending on state law | Possible, depending on state law |
HECM scenarios: a payoff, a credit line, a younger spouse, a purchase
These examples illustrate common goals; counseling and a loan officer can show what applies to you.
- A widow with a small remaining mortgage uses a HECM to pay it off, ending her monthly payment, and keeps up the taxes and insurance from her pension.
- A couple in their seventies set up a HECM line of credit and leave it largely untouched, planning to draw on it if health costs rise.
- A homeowner whose spouse is in their fifties names that spouse as an eligible non-borrowing spouse, after both attend counseling and learn what the deferral does and does not cover.
- Retirees selling a large house use a HECM for Purchase to buy a single-level home, paying the difference from their sale proceeds and moving in within 60 days of closing.
Counseling, appraisal and closing a HECM
Timing depends on counseling availability, the appraisal and title, and counseling must come before the lender can process the application.
- Counseling first. A HUD-approved HECM counselor reviews how the loan works, its costs, your obligations and alternatives, and gives you a certificate for the lender.
- Application and disclosures, including a comparison of payment plans produced with FHA's HECM calculator software.
- Financial assessment, appraisal and title review, with any required repairs identified.
- Closing. With most reverse mortgages you then have three business days to cancel, in writing.
- After closing, you certify occupancy each year, keep property charges current and review statements that show the growing balance.
Reverse mortgage myths about ownership, VA and heirs
Reverse mortgages attract more myths than most loans, and some are exploited in advertising.
- Myth: VA offers reverse mortgages to veterans. Reality: It does not; the CFPB warns that ads implying VA approval or a special veteran reverse mortgage can be misleading.
- Myth: There are no payments, so I owe nothing until I die. Reality: Taxes, insurance, dues and upkeep must be paid, and failing to pay them can make the loan due.
- Myth: My spouse is automatically protected. Reality: Only a spouse who meets HUD's eligible non-borrowing spouse conditions, including being named at closing, gets the deferral.
- Myth: My heirs will inherit the debt. Reality: A HECM is non-recourse, so heirs are not personally liable for any shortfall. The loan is still repaid from the home: heirs can repay, sell or hand over the home, and less equity is left for them.
- Myth: I must own my home free and clear. Reality: An existing mortgage can be paid off with HECM proceeds.
See also
Common questions
14 questions
What happens to a reverse mortgage when I move or pass away?
The loan becomes due when the last borrower dies, sells the home or stops living there as a primary residence, including a health-related absence of more than 12 months in a row, though an eligible non-borrowing spouse may be able to stay. The home is usually sold to repay the loan, or heirs can pay it off to keep the home. If the balance is more than the home is worth, FHA insurance covers the shortfall, so neither you nor your heirs owe the difference.
What happens to my spouse if they are not on the loan?
A spouse who is not a borrower can stay in the home after the borrower dies if they qualify as an eligible non-borrowing spouse: married to the borrower at closing, named in the loan documents and living in the home as a primary residence. They must also establish a legal right to stay, keep up taxes and insurance and maintain the home. They cannot draw more money from the loan, so cover this at counseling.
What happens in HECM counseling?
Before a lender can process your application, you meet with a HUD-approved HECM counselor who explains how the loan works, its costs, your obligations and other options. Every borrower, any non-borrowing spouse and any other owner on title must take part. You receive a certificate to give the lender, and HUD publishes a list of approved counseling agencies.
What do I still have to pay with a reverse mortgage?
You remain responsible for property taxes, homeowners insurance, any required flood insurance, condo or homeowners association dues, and keeping the home in good repair. If the lender's financial assessment shows a need, part of the loan can be set aside to pay taxes and insurance. Falling behind on these obligations can make the loan due.
Can I use a reverse mortgage to buy a home?
A HECM for Purchase allows it. It lets borrowers 62 and older buy a one- to four-unit home they will live in as their primary residence and take out the reverse mortgage in one transaction. You pay the difference between the price and what the HECM provides from your own funds, such as cash on hand or the sale of your current home, and you must move in within 60 days of closing. Property taxes, insurance and upkeep still apply, and HUD-approved counseling is required.
Does the lender own my home with a reverse mortgage?
No. The title stays in your name, just as with a regular mortgage, and the loan is a lien on the home. What changes is that the balance grows over time because interest and fees are added to it, which reduces your equity.
Does VA offer a reverse mortgage for veterans?
No. The CFPB states that the Department of Veterans Affairs does not offer any reverse mortgage loans, and it warns about ads that imply VA approval or promise veterans special reverse mortgage deals. Veterans who are 62 or older can consider an FHA-insured HECM under the same rules as other homeowners, and VA home loan benefits remain a separate program. Be cautious of anyone using VA logos or language to market a reverse mortgage.
How much money can I get from a HECM?
It depends on the age of the youngest borrower or eligible non-borrowing spouse, the expected interest rate and your home's value, up to FHA's maximum claim amount, which is $1,249,125 for 2026. Required payoffs and costs come out first, and HUD limits how much you can draw in the first 12 months. A HECM counselor or loan officer can run FHA's calculator for your situation.
Can I get a reverse mortgage if I still owe money on my home?
Possibly, if there is enough equity. Any existing mortgage or other lien must be paid off at closing, either from the HECM proceeds or with your own funds, so the HECM is the only lien in first position. Using a HECM this way ends that monthly mortgage payment, but it also reduces what remains available for other needs.
What ways can I receive money from a HECM?
HUD offers six payment plans. A fixed-rate HECM pays a single lump sum at closing. Adjustable-rate HECMs offer monthly loan advances for as long as a borrower lives in the home and meets the loan's obligations (tenure), monthly advances for a set number of months (term), a line of credit, or a line of credit combined with tenure or term advances. Every advance is loan money that adds to the balance. With an adjustable-rate HECM you can change plans later if funds remain, and the lender cannot require minimum draws.
Can a reverse mortgage go into foreclosure?
Yes. A HECM can become due and lead to foreclosure if property taxes or insurance go unpaid, the home is not kept in repair, no borrower lives there as a principal residence, or another loan obligation is not met. If you receive a default notice, the CFPB urges you to act quickly and contact your servicer and a HUD-approved housing counselor about the options available.
What options do my heirs have when the loan comes due?
HUD's rules give heirs several choices after the servicer notifies them that the loan is due: pay off the balance in full; keep the home or sell it while settling the loan for the lesser of the balance or an amount HUD sets from the home's current appraised value; or sign a deed in lieu of foreclosure. Because a HECM is non-recourse, heirs are not personally liable for any amount above what the home brings. Contact the servicer promptly, since deadlines apply.
Are there reverse mortgages other than HECMs?
Yes. The CFPB describes two other kinds. Proprietary reverse mortgages are private loans that are not federally insured and are typically designed for higher-value homes, so their rules, costs and protections come from the lender and state law rather than FHA. Single-purpose reverse mortgages are offered by some state and local governments and nonprofits for one approved use, such as repairs or property taxes, and may be limited to lower-income homeowners in certain areas.
Can I cancel a reverse mortgage after closing?
With most reverse mortgages, yes. The CFPB explains that you generally have three business days after closing to cancel for any reason without penalty, by notifying the lender in writing; certified mail with a return receipt gives you a record. A HECM for Purchase is generally not covered by this right, because federal rescission rules exclude loans used to acquire a home.
This page explains how this type of loan generally works. Programs, guidelines and availability vary by lender and change often. Contact Ruben to see which options are available for your scenario today.