What is a HECM Reverse Mortgage?

Quick Answer: A home equity conversion mortgage, commonly called a HECM loan, is a reverse mortgage for homeowners age 62 or older that is insured by the Federal Housing Administration (FHA). It allows you to convert part of your home equity into cash, as long as you meet ongoing obligations. The loan is repaid when you sell, move out, or pass away.

Key Takeaways

A home equity conversion mortgage (HECM) is an FHA-insured reverse mortgage available to eligible homeowners age 62+ that allows them to access a portion of their home equity.¹
HECMs include certain federal safeguards and regulatory requirements designed to help protect borrowers.
The loan becomes due and payable under specific conditions outlined in the loan agreement.

Making the most of your retirement often means making thoughtful decisions about your finances—including how and when to tap into the resources at your disposal, such as home equity. For homeowners 62+, one option is a HECM, the most common type of reverse mortgage in the United States.

While reverse mortgages have sometimes been misunderstood, the HECM loan option has undergone many changes over the years to strengthen safeguards, improve oversight, and help borrowers make informed decisions. Understanding how the loan option works is key to determining whether it fits into your retirement plans.

In this guide, we’ll go over how a HECM works, who may be eligible, and what to consider before applying.

What is a HECM loan?

A HECM is the FHA-insured version of a reverse mortgage available to homeowners age 62 or older. It may allow eligible borrowers to convert a portion of their home equity into cash while continuing to live in the home.¹

Unlike a traditional mortgage—where you make monthly mortgage spayments to a lender—a HECM does not require monthly mortgage payments as long as you meet your loan obligations. Instead, the lender disburses funds to you, which you can receive as a lump sum, line of credit, monthly payments, or a combination of these options. Borrowers must continue to meet loan requirements, including living in the home as a primary residence, paying property taxes and homeowners insurance, and maintaining the property. If these obligations are not met, the loan may become due and payable.

HECM loans are insured by the FHA and are available through FHA-approved lenders.¹

→ Learn more: What is a reverse mortgage and how does it work?

The borrower must meet all loan obligations, including living in the property as the principal residence and paying property charges, including property taxes, fees, and hazard insurance. The borrower must maintain the home. If the homeowner does not meet these loan obligations, then the loan will need to be repaid.

The right to remain in the home is contingent on paying property taxes and homeowner’s insurance, maintaining the home, and complying with the loan terms.

How does a HECM work?

With a HECM, the lender disburses proceeds to you—not the other way around. You can receive your funds as:

A lump sum
A line of credit
Monthly payments
Or a combination of these options

Over time, interest and fees accrue, and the loan balance increases. The loan generally becomes due and payable when the last surviving borrower sells the home, moves out permanently, or dies.

Each year, the FHA sets a lending limit that caps the portion of home value used in the HECM calculation. For 2026, the HECM FHA mortgage limit is $1,249,125. This figure affects how much of your home’s value the FHA will consider when determining how much you may be able to borrow.¹

To learn more, please visit the CFPB’s “Reverse Mortgage: A Discussion Guide.”

What are the eligibility requirements for a HECM?

To be eligible for a HECM, borrowers must meet certain FHA requirements. These guidelines are designed to help ensure the loan is sustainable over the long term.¹

You may be eligible if you meet the following criteria:

Age requirement:You must be at least 62 years old.
Ownership and equity:You must own your home outright or have enough equity to pay off your existing mortgage with the reverse mortgage proceeds at closing.
Property type:The home must meet FHA requirements. Eligible properties include single-family homes, condominiums approved by the Department of Housing and Urban Development (HUD), certain manufactured homes, and properties with up to four units (one of which must be owner-occupied).¹
Occupancy requirement:The home must be your principal residence.

In addition to property and age requirements, borrowers must meet certain financial standards:

Financial assessment: Lenders must review your credit history, income, and ongoing expenses to determine whether you can continue meeting property-related obligations.
No delinquent federal debt: You must not have any unresolved federal debt, such as unpaid federal taxes or federal student loans in default.

Finally, before applying for a HECM, you must complete a session with a HUD-approved housing counselor. This independent counseling session is a required safeguard to help ensure borrowers understand how the loan works.¹

During counseling, you’ll review:

How a HECM affects your home equity
Your ongoing responsibilities as a borrower
Repayment triggers and when the loan becomes due
Alternatives to a HECM

The counselor does not work for the lender and cannot recommend a specific loan. Their role is to provide objective information so you can make a more informed decision.

What fees and costs are associated with a HECM?

Like most mortgage products, a HECM includes upfront and ongoing costs. Understanding these fees can help you evaluate how the loan fits into your overall financial plan.

Common HECM costs may include:

FHA mortgage insurance premium (MIP): Borrowers pay both an upfront and an annual premium for FHA-insured HECMs. This insurance protects borrowers and lenders and helps cover any shortfall if the loan balance exceeds the home’s value when it becomes due.¹
Origination fee: This compensates the lender for processing and underwriting the loan. The FHA limits how much lenders may charge.¹
Third-party closing costs: These standard real estate expenses may include appraisal fees, title services, recording fees, and other required charges.
Servicing fees (if applicable): Some loans may include a monthly servicing fee to cover administrative tasks such as sending statements and managing the loan.

Typically, most HECM costs are financed into the loan rather than paid out of pocket at closing. As a result, they are added to the loan balance and accrue interest over time, increasing the total loan amount owed.

→ Learn more in our guide, Reverse mortgage fees and costs explained.

How do you apply for a HECM?

Applying for a HECM involves completing several required steps to confirm eligibility and comply with FHA guidelines. The process includes independent counseling, working with an FHA-approved lender, undergoing a financial assessment, and finalizing the loan through closing.¹

Along the way, your lender will verify property details, review financial information, and help you select a disbursement option that aligns with your needs. While the process is similar in structure to a traditional mortgage, it also includes additional safeguards specific to HECMs.

Let’s take a closer look at each step:

1. Review eligibility requirements

Before starting the application process, make sure you meet the basic FHA requirements. This includes being at least 62 years of age, owning an eligible property as your primary residence, having sufficient equity, and demonstrating the ability to meet ongoing financial obligations such as property taxes and insurance.¹

2. Complete HUD-approved counseling

All prospective HECM borrowers must complete independent counseling with an approved advisor. This required step helps ensure you understand how the loan works, your responsibilities, repayment triggers, and possible alternatives.¹

3. Choose a reverse mortgage lender

HECM loans are available only through FHA-approved lenders. When comparing options, consider experience, customer service, and loan terms. The lender you select will guide you through documentation and underwriting.¹

4. Undergo the financial assessment

As part of the application, the lender conducts a financial assessment to review your credit history, income, and expenses. Unlike traditional mortgages, HECM approval is not based solely on your credit score. Instead, the evaluation focuses on your ability and willingness to meet ongoing property-related obligations, such as paying property taxes and homeowners insurance and maintaining the home.

In some cases, a Life Expectancy Set-Aside (LESA) may be required to ensure these expenses are covered.

5. Select your disbursement method

HECM proceeds may be received as a lump sum, line of credit, monthly payments, or a combination. Your selection should align with your financial goals.

6. Close on the loan

If approved, you’ll attend closing to sign the final documents. After closing—and any required waiting period—funds are disbursed according to your chosen option. Repayment is generally deferred until a triggering event occurs, provided you continue to meet your loan obligations.

What are the pros and cons of a HECM?

The pros of a HECM loan include access to home equity without selling the home, no required monthly mortgage payments, and the ability to remain in the property while deferring repayment until a future triggering event. Because HECMs are insured by the FHA, they also include certain federal safeguards.¹

However, there are trade-offs to consider. Interest and fees accrue over time, reducing available equity, and reverse mortgage borrowers must continue meeting property-related obligations such as taxes, insurance, and maintenance. Understanding both the advantages and potential drawbacks can help determine whether a HECM fits into your broader retirement strategy.

Pros

Let’s walk through the specifics, starting with the pros:

Access home equity for retirement needs: Convert a portion of your home equity into funds that could increase cash flow, cover expenses, or provide additional financial flexibility.
No required monthly principal and interest payments: Unlike a traditional mortgage, you’re not required to make monthly payments as long as you continue meeting loan obligations.
Remain in your home: Continue living in the property as your primary residence while accessing your equity.
Maintain ties to your community: By reducing the need to sell or relocate, a HECM may help you stay close to friends, family, and local support networks.

Cons

Here’s a closer look at some potential drawbacks:

Ongoing costs and foreclosure risk: Borrowers must continue paying property taxes, homeowners insurance, and maintaining the home. Failure to meet these obligations may cause the loan to become due and payable, which could result in foreclosure.
Upfront costs and limited proceeds: HECMs include mortgage insurance premiums and lender fees, and borrowers do not receive the full market value of the home. The amount available depends on age, home value, interest rates, and loan option limits.
Reputation concerns and fraud risk: Reverse mortgages have faced criticism in the past, and older adults may be targets of financial fraud. Although today’s FHA-insured HECM loan option includes strengthened safeguards, borrowers should work with reputable lenders and trusted advisors.¹

The right to remain in the home is contingent on paying property taxes and homeowner’s insurance, maintaining the home, and complying with the loan terms.

What are the borrower’s responsibilities under a HECM?

Under a HECM, borrowers are not required to make monthly principal and interest payments. However, they must continue meeting certain property and occupancy requirements. Failure to meet these obligations can cause the loan to become due and payable, so it’s important to understand these ongoing responsibilities.

They include:

Paying property taxes and insurance: You must remain current on property taxes, homeowners insurance, and other required property charges.
Maintaining the home: The property must be kept in good repair in accordance with FHA requirements.¹
Occupying the home as a primary residence: The home must remain your principal residence.
Reporting extended absences: You must notify your lender if you expect to be away from the home for an extended period. An absence of more than six consecutive months for non-medical reasons—or more than 12 consecutive months for a health-related condition—may cause the loan to become due and payable.

What happens if HECM loan obligations aren’t met?

If required property charges are unpaid, the home is not properly maintained, or occupancy requirements are no longer met, the lender may declare the loan due and payable, which could ultimately lead to foreclosure.

However, the HECM loan option includes safeguards designed to reduce this risk. Before approval, a financial assessment evaluates whether borrowers can reasonably meet ongoing obligations, and mandatory HUD-approved counseling helps ensure applicants understand these responsibilities. These protections are intended to promote informed decision-making and long-term sustainability.¹

Carefully reviewing these requirements can help borrowers decide whether a HECM aligns with their long-term financial plans.

How does a HECM affect heirs and estate planning?

A HECM can impact heirs because the loan balance becomes due when the last borrower permanently leaves the home. While heirs are not personally responsible for the debt, the remaining home equity may be reduced over time as interest and fees accrue.

Here’s what heirs and families should understand:

Heirs are not personally liable beyond the home’s value: HECMs are non-recourse loans, meaning repayment is limited to the home’s value. Neither heirs nor the estate are required to use other assets to cover any shortfall.²
FHA insurance provides additional protection: If the home’s value is less than the outstanding loan balance, FHA insurance covers the difference, so heirs are not responsible for the remaining amount.¹
Planning ahead matters: Because interest accrues over time and equity may decrease, discussing a HECM with family members and estate planning professionals can help ensure it aligns with long-term financial and inheritance goals.

→ Read more in our guide, Are heirs responsible for reverse mortgage debt?

What happens at the end of a HECM?

A HECM typically becomes due and payable when the last surviving borrower dies, sells the home, permanently moves out, or fails to meet loan obligations such as paying property taxes or maintaining homeowners insurance.

When the loan becomes due, it must be repaid. Heirs or the estate generally may:

Sell the home: Use the sale proceeds to repay the loan balance. Any remaining equity belongs to the estate.
Keep the home: Repay the lesser of the outstanding loan balance or 95% of the home’s current appraised value.
Refinance or pay off the loan: Use other funds or obtain a new mortgage to satisfy the balance.

Myths and misconceptions about HECM reverse mortgage loans

Reverse mortgages are sometimes misunderstood. Clearing up common myths can help borrowers make informed decisions. Here are some of the most common myths—and the facts:

Myth: Reverse mortgages aren’t regulated or protected.

Fact: HECMs are the only reverse mortgages insured by the FHA. The loan option includes required HUD-approved counseling, a financial assessment, and federal oversight designed to protect borrowers.¹

Myth: Heirs could get stuck with a large debt.

Fact: HECMs are non-recourse loans, meaning borrowers and their heirs will never owe more than the home’s value when the loan becomes due and payable. If the loan balance exceeds the home’s value, FHA insurance covers the shortfall.^{1, 2}

Myth: It’s free money.

Fact: While HECMs do not require monthly principal and interest payments, the loan balance grows over time as interest and fees accrue. Repayment is typically deferred until the borrower no longer lives in the home as a primary residence or doesn’t comply with loan terms, but the loan must eventually be repaid.

Myth: There are no ongoing costs.

Fact: Borrowers must continue paying property taxes, maintaining homeowners insurance, and keeping the home in good condition. For HECM, there is a mortgage insurance premium. Failure to meet these obligations can cause the loan to become due and payable.

HECM alternatives

A HECM is one way eligible homeowners can access home equity. Depending on your financial goals, age, and housing plans, other options may also be worth considering.

Proprietary reverse mortgage: A privately offered reverse mortgage that is not insured by the FHA. These loans may offer higher borrowing limits for higher-value homes. Eligibility requirements, costs, and borrower protections vary by lender.¹
HECM for purchase: A federally insured reverse mortgage that allows eligible homebuyers age 62 or older to purchase a new primary residence using a substantial down payment. Unlike a traditional HECM, which is used to access equity in a current home, a HECM for purchase is used to buy a new primary residence. No monthly mortgage payments are required as long as loan obligations are met.*
Home equity line of credit (HELOC): A revolving line of credit secured by your home that allows you to borrow funds during a set draw period. HELOCs typically require monthly payments and lender approval based on income and credit.
Home equity loan: A lump-sum loan secured by your home that is repaid in fixed monthly payments over a set term. Eligibility is generally based on income, credit, and available home equity.³

Here’s a closer look at how these HECM alternatives compare, side by side:

Feature	Proprietary reverse mortgage	HECM for purchase	HELOC	Home equity loan³
Minimum age	Typically 55–62+ (varies by lender)	62+	No age requirement	No age requirement
Primary purpose	Access equity in current home	Purchase a new primary residence	Flexible access to equity	Lump-sum equity access
Monthly mortgage payments required?*	No*	No*	Yes	Yes
Payment structure	Loan balance increases over time; repaid when maturity event occurs	Loan balance increases over time; repaid when maturity event occurs	Revolving credit line with required monthly payments	Fixed monthly principal and interest payments
Credit and income requirements	Financial assessment required	Financial assessment required	Income and credit review required	Income and credit review required
Borrowing limits	May exceed FHA lending limits; varies by lender and property value¹	Subject to FHA lending limits and borrower eligibility¹	Based on available home equity, income, and lender criteria	Based on available home equity, income, and lender criteria
FHA-insured¹	No	Yes	No	No
Repayment trigger	Due when borrower sells, moves out permanently, or passes away	Due when borrower sells, moves out permanently, or passes away	Repaid through required monthly payments	Repaid through fixed monthly payments

*The borrower must meet all loan obligations, including living in the property as the principal residence and paying property charges, including property taxes, fees, and hazard insurance. The borrower must maintain the home. If the homeowner does not meet these loan obligations, then the loan will need to be repaid.

Who is best suited for a HECM?

A HECM is best suited for homeowners age 62+ who have significant home equity and plan to stay in their homes long term. It may be a good fit for those seeking additional cash flow in retirement without making monthly principal and interest payments.

However, borrowers must continue paying property taxes, maintaining homeowners insurance, and keeping the home in good condition, and the loan balance grows over time. Older homeowners who expect to move soon or who want to preserve maximum equity for heirs may want to consider other options.

To estimate how much equity you may be able to access and see whether a HECM fits your needs, try our reverse mortgage calculator or speak with a HUD-approved counselor or FHA-approved lender about your options.¹

FAQs

What is the difference between a reverse mortgage and a HECM?

A reverse mortgage is a broad term for loans that allow homeowners to access their home equity without required monthly principal and interest payments. A HECM is the most common type of reverse mortgage and is insured by the FHA. Other reverse mortgage products, such as proprietary reverse mortgages, are offered by private lenders and may have different terms, lending limits, and consumer protections.¹

Can I lose my home with a HECM loan?

Yes, in some circumstances. You must continue paying property taxes, maintaining homeowners insurance, and keeping the home in good condition. The property must also remain your primary residence. If these obligations aren’t met, the loan may become due and payable, which could lead to foreclosure.

What are the downsides of a HECM loan?

HECMs include upfront and ongoing costs, and the loan balance grows over time as interest accrues. This may reduce the equity left to heirs. Borrowers must also continue meeting property-related obligations and complying with loan terms.

Can you refinance a HECM?

Yes. In some cases, borrowers may refinance into a new HECM or a traditional mortgage, depending on home value, rates, and financial goals.

How much money can you get from a HECM?

The amount you may be able to receive depends on factors such as your age, home value, current interest rates, and the FHA lending limit. Rather than borrowing the full value of the home, borrowers become eligible for a percentage based on these factors.¹

What happens if the loan balance exceeds the home’s value?

HECMs are non-recourse loans. Neither you nor your heirs will owe more than the home’s value when the loan becomes due. FHA insurance covers any shortfall.^{1, 2}

Do I still own my home with a HECM?

Yes. You retain the title to your home. The lender places a lien on the property, similar to a first mortgage.

Disclaimers

This article is intended for general informational and educational purposes only and should not be construed as financial or tax advice. For tax advice, please consult a tax professional. For more information about whether a reverse mortgage fits into your retirement strategy, you should consult your financial advisor.

¹These materials were not provided by HUD or FHA and were not approved by FHA or any government agency.

²A non-recourse reverse mortgage transaction limits the homeowner’s liability to the proceeds of the sale of the home (or any lesser amount specified in the credit obligation).

Non-recourse means that you, or your estate, can’t owe more than the value of your home when the loan becomes due and the home is sold.

Non-recourse means that if you default on the loan, or if the loan cannot otherwise be repaid, the lender cannot look to your other assets (or your estate’s assets) to meet the outstanding balance on your loan.

³Finance of America does not currently offer home equity loans.