A Home Equity Conversion Mortgage, commonly called a HECM, is the most common type of reverse mortgage.
It is insured by the Federal Housing Administration, or FHA, and is designed for eligible homeowners age 62 and older.
A HECM allows a homeowner to access a portion of the equity in the home without making a required monthly principal and interest mortgage payment.
That does not mean there are no responsibilities.
You still own the home, and you are still responsible for property taxes, homeowners insurance, maintaining the property, and meeting the other requirements of the loan. Consumer Financial Protection Bureau
For the right homeowner, a HECM can be a useful financial tool.
For someone else, it may not be the best option.
The important thing is understanding how it works before deciding whether it makes sense.
How Does a HECM Work?
A HECM is different from a traditional mortgage.
With a traditional mortgage, you usually make monthly principal and interest payments and the loan balance goes down over time.
With a HECM, there is generally no required monthly principal and interest mortgage payment.
Instead, interest and certain fees are added to the loan balance over time, so the balance usually increases. Consumer Financial Protection Bureau
The loan typically becomes due when certain events occur, such as when the last borrower permanently leaves the home, sells the property, or dies, subject to applicable rules for an eligible non-borrowing spouse. Consumer Financial Protection Bureau
Who Can Qualify for a HECM?
There are several basic requirements.
Generally, the borrower must:
- Be at least 62 years old
- Live in the property as a principal residence
- Own the home outright or have enough equity to pay off the existing mortgage at closing
- Complete HUD-approved reverse mortgage counseling
- Meet the lender’s financial assessment requirements
- Stay current on required property charges
- Maintain the property
Federal debt can also matter. A borrower generally cannot be delinquent on federal debt, although reverse mortgage proceeds may sometimes be used to satisfy that debt as part of the transaction. Consumer Financial Protection Bureau
Can You Get a HECM If You Still Have a Mortgage?
Yes, in many cases.
You do not have to own your home free and clear.
If you currently have a mortgage, that mortgage generally needs to be paid off as part of the HECM transaction.
The reverse mortgage proceeds may be used to pay off the existing loan. Consumer Financial Protection Bureau
Whether there is enough equity depends on factors such as:
- Your age
- Home value
- Current mortgage balance
- Interest rates
- Program guidelines
For example, someone with a $700,000 home and a relatively small existing mortgage may have a very different situation from someone with the same home value but a much larger mortgage balance.
That is why the actual numbers matter.
How Much Can You Get From a HECM?
There is no one percentage that applies to every homeowner.
The amount available depends on several factors, including age, home value, interest rates, and the existing mortgage balance. Consumer Financial Protection Bureau
For 2026, the HECM maximum claim amount is $1,249,125. HUD
That does not mean every borrower can receive that amount.
The actual principal limit is based on the individual transaction and program calculations.
In general, age and interest rates can have a meaningful impact on how much equity may be available.
How Can HECM Proceeds Be Received?
Depending on the loan structure and program requirements, HECM proceeds may be available in different ways.
Possible options can include:
- A line of credit
- Monthly payments
- A lump sum in certain situations
- A combination of payment options
The right choice depends on what the homeowner is trying to accomplish.
Some people want to pay off an existing mortgage and reduce monthly expenses.
Others want a line of credit available for future needs.
Others may want supplemental retirement income.
There is no single option that is right for everybody.
HECM Line of Credit
One of the most interesting features of a HECM can be the line-of-credit option.
Instead of taking all available proceeds at once, a borrower may be able to leave part of the available funds unused and access them later.
That can provide flexibility for things such as:
- Home repairs
- Unexpected expenses
- Medical costs
- Retirement planning
- Future income needs
A HECM line of credit is different from a traditional HELOC.
The qualification, payment structure, and long-term behavior of the line are different.
If you are comparing the two, it is important to understand those differences rather than simply looking at the initial rate.
[Learn More About a Reverse Mortgage Line of Credit]
Do You Still Own the Home?
Yes.
The lender does not become the owner of the property simply because you have a reverse mortgage.
The title remains in the homeowner’s name. Consumer Financial Protection Bureau
The home is simply being used as collateral for the loan, just like with a traditional mortgage.
You are still responsible for maintaining the home and paying required property charges.
What Are Your Responsibilities?
This is one of the most important parts of a HECM.
A reverse mortgage does not eliminate every housing expense.
The borrower is still responsible for things such as:
- Property taxes
- Homeowners insurance
- Flood insurance if required
- Home maintenance
- Using the property as the principal residence
Failure to meet those obligations can create serious problems and may eventually lead to foreclosure. Consumer Financial Protection Bureau
This is why the lender performs a financial assessment before approving the loan.
The lender wants to determine whether the borrower is likely to be able to keep up with these ongoing obligations.
What Is the Financial Assessment?
The financial assessment is part of the HECM underwriting process.
The lender looks at the borrower’s financial situation to determine whether the borrower appears able to continue paying property taxes, homeowners insurance, and other required property charges. Consumer Financial Protection Bureau
The lender may review things such as:
- Income
- Credit history
- Property charge payment history
- Existing debts
- Residual income
This is different from traditional mortgage underwriting, but it does not mean that credit and income are ignored.
If the lender determines that additional protection is needed, a portion of the HECM proceeds may need to be set aside to pay future property charges. Consumer Financial Protection Bureau
Is Reverse Mortgage Counseling Required?
Yes.
Before obtaining a HECM, the borrower must complete counseling with a HUD-approved reverse mortgage counseling agency. Consumer Financial Protection Bureau
The purpose of counseling is to make sure the homeowner understands:
- How the loan works
- Costs
- Responsibilities
- Alternatives
- When the loan becomes due
- How the loan may affect heirs
I actually think the counseling requirement is a good thing.
A reverse mortgage is a major financial decision, and the borrower should understand exactly what they are doing before closing.
What Does a HECM Cost?
HECM loans have closing costs just like other mortgages.
Those costs may include:
- Origination fees
- Appraisal
- Title charges
- Recording fees
- Credit-related charges
- FHA mortgage insurance
- Other third-party closing costs
There are also ongoing costs that may be added to the loan balance over time, including interest and mortgage insurance. Consumer Financial Protection Bureau
In many cases, closing costs can be financed into the loan rather than paid out of pocket.
However, financing the costs means there is less equity available to the borrower.
What Happens When the Borrower Dies?
This is another question I hear a lot.
A reverse mortgage does not automatically mean the family loses the home.
When the loan becomes due, heirs may have options.
They may be able to:
- Pay off the reverse mortgage and keep the property
- Obtain financing to pay off the loan
- Sell the property and use the proceeds to repay the loan
- Allow the property to be turned over to the lender if appropriate
If the loan balance is greater than the home’s value, HECM rules provide protections because the loan is FHA insured. CFPB guidance says heirs generally do not have to repay more than the applicable amount tied to the home’s value. Consumer Financial Protection Bureau
This is one of the reasons families should understand the loan before it is taken out.
[Learn More About Reverse Mortgages and Heirs]
Can You Use a HECM to Buy a Home?
Yes.
A HECM can also be used to purchase a new primary residence.
This is commonly called a HECM for Purchase.
This can be useful for someone who wants to:
- Downsize
- Move closer to family
- Relocate
- Buy a different style of home
- Keep more cash available after selling an existing home
The borrower contributes a portion of the purchase price and the HECM provides the remaining financing, subject to program requirements.
Not every property qualifies for HECM for Purchase, so property type matters. Consumer Financial Protection Bureau
[Learn More About HECM for Purchase]
What Property Types May Qualify?
Eligible property types can include certain:
- Single-family homes
- Two-to-four-unit properties
- Condominiums
- Townhomes
- Manufactured homes that meet FHA requirements
Property eligibility can be more complicated than it appears, especially with condominiums and manufactured homes. Consumer Finance.gov
If you are unsure whether your property qualifies, it is better to check before assuming that it does or does not.
Is a HECM Right for Everybody?
No.
I would never tell someone that every homeowner over 62 should get a reverse mortgage.
For some people, it can be an excellent financial tool.
For others, a HELOC, traditional refinance, downsizing, selling the home, or simply doing nothing may make more sense.
It depends on the goal.
A HECM may be worth looking at if you are trying to:
- Eliminate an existing monthly principal and interest mortgage payment
- Access home equity
- Create a line of credit
- Increase monthly cash flow
- Purchase another primary residence
- Keep more retirement assets available
- Create additional financial flexibility
But the costs, long-term plans, property charges, estate goals, and alternatives should all be considered.
Why Work With Someone Who Understands Reverse Mortgages?
Reverse mortgages are different from traditional mortgages.
The guidelines are different.
The calculations are different.
The counseling requirements are different.
The way the loan balance works is different.
And the questions homeowners have are usually different.
I have worked in finance for more than 25 years and have experience in both traditional mortgage lending and reverse mortgages.
My goal is not to push someone into a HECM.
My goal is to explain how it works, look at the actual numbers, and help determine whether it makes sense for the homeowner.
Sometimes it does.
Sometimes it does not.
Either way, you should understand the loan before making a decision.
Want to See Whether a HECM May Work for You?
You do not need to know exactly which reverse mortgage program you need before contacting me.
Start with a few basic pieces of information:
- Age of the youngest borrower
- Approximate home value
- Current mortgage balance
- Property type
- State where the property is located
- What you are trying to accomplish
From there, we can take a look at the situation and see what options may be worth exploring.
Call or text Shawn at (714) 271-8524 or email Info@TheBroker.Finance to discuss your reverse mortgage options.
[Contact Shawn]
[Explore Reverse Mortgage Options]
This information is for educational purposes only and is not a commitment to lend. HECM eligibility, proceeds, rates, costs, and program requirements are subject to FHA guidelines, lender underwriting, counseling requirements, and current program rules.