What Is a HECM Reverse Mortgage?

A Home Equity Conversion Mortgage (HECM) is a reverse mortgage insured by the Federal Housing Administration (FHA) and designed for homeowners age 62 or older.

A HECM allows eligible homeowners to convert a portion of their home equity into loan proceeds while continuing to own and live in their home.

Unlike a traditional mortgage, there are generally no required monthly principal and interest mortgage payments as long as the loan remains in good standing.

You Continue to Own Your Home

With a HECM, you retain title and ownership of your home. The lender does not take ownership simply because you have a reverse mortgage.

To keep the loan in good standing, you must continue to:

How Much Can You Receive?

The amount available through a HECM is based on several factors, including:

Any existing mortgage or required property liens generally must be paid off at closing using HECM proceeds and/or other available funds.

How Can You Receive Your HECM Proceeds?

One of the advantages of a HECM is the flexibility it can provide in how you receive your available loan proceeds. The options available depend on whether you choose an adjustable-rate or fixed-rate HECM and the amount of proceeds available.

Line of Credit
With an eligible adjustable-rate HECM, available funds can be placed in a line of credit and accessed when needed.

An important feature is that the unused portion of the HECM line of credit may grow over time, giving you increased borrowing capacity in the future. This growth is not interest earned on your money—it increases the amount of loan proceeds potentially available to you.

Monthly Advances
You may be able to receive scheduled monthly advances for a specified period or, depending on the payment plan, for as long as you continue to meet the loan requirements.

Lump-Sum Proceeds
A fixed-rate HECM generally provides available proceeds as a single lump-sum disbursement at closing, subject to applicable initial-disbursement limitations.

Combination of Options
With an adjustable-rate HECM, you may be able to combine options—for example, receiving some proceeds at closing while keeping additional funds available through a line of credit or monthly advances.

You Don't Have to Use All of Your Available Credit

If you establish a HECM line of credit, you are not required to withdraw all of the available funds. You can leave unused funds available for future needs, subject to the terms of the loan.

Ways a HECM May Help You

A HECM can be used as more than simply a way to access home equity. Depending on your circumstances, it may become part of your overall retirement and financial plan.

Pay Off Your Existing Mortgage
HECM proceeds can be used to pay off an existing mortgage, potentially eliminating required monthly principal and interest mortgage payments.

Create a Line of Credit
Establish a source of available funds that can be accessed when needed for future expenses or unexpected needs.

Supplement Retirement Cash Flow
Available proceeds may help supplement Social Security, pensions, retirement accounts, or other sources of income.

Make Home Improvements
Use available funds for repairs, renovations, accessibility improvements, or modifications that may make it easier to remain in your home.

Prepare for Future Expenses
A HECM line of credit can provide another financial resource for expenses that may arise later in retirement.

Preserve Other Assets
Accessing home equity may provide greater flexibility in deciding when and how to use savings, investments, or other retirement assets.

The Loan Doesn't Have to Be Repaid Until a Maturity Event

Generally, repayment becomes due when the last remaining borrower permanently leaves the home, sells the property, passes away, or another event occurs that causes the loan to become due and payable.

When the loan becomes due, the home can be sold to repay the balance, or heirs may have options to keep the property by satisfying the applicable repayment requirements.

A HECM Is a Non-Recourse Loan

A HECM includes an important FHA protection: it is non-recourse.

Generally, neither the borrower nor the borrower's estate will be required to repay more than the applicable value of the home when the loan is repaid, even if the loan balance has grown beyond the home's value.

What Happens to the Home and Your Heirs?

A common concern about reverse mortgages is what happens to the home in the future. With a HECM, you remain the owner of your home, and your heirs can still inherit the property.

When the HECM becomes due and payable, your heirs generally have choices.

Keep the Home
If your heirs want to keep the property, they may repay the amount required under HECM guidelines, often by refinancing the home or using other funds.

Sell the Home
Your heirs can sell the property, use the proceeds to repay the reverse mortgage, and retain any remaining equity after the loan and other applicable costs are paid.

If the Loan Balance Exceeds the Home's Value
Because a HECM is a non-recourse loan, neither the borrower nor the estate is generally responsible for paying a deficiency beyond the applicable value of the home when the loan is satisfied according to HECM requirements.

Your Remaining Equity Still Belongs to You

A reverse mortgage does not mean the lender receives all of the future value of your home.

If you sell the home while living, the HECM is repaid and the remaining equity belongs to you after applicable liens and selling expenses are paid.

If the home is sold after your death, remaining equity generally passes to your estate or heirs after the reverse mortgage and applicable obligations are satisfied.

Include Your Family in the Conversation

When appropriate, I encourage homeowners to include their children, heirs, financial advisors, or other trusted family members in the discussion.

Understanding how the reverse mortgage works today—and what happens later—can help everyone make a more informed decision.

HECM Counseling — What to Expect

Before completing a HECM reverse mortgage, borrowers are required to participate in independent counseling with a HUD-approved HECM counselor.

The purpose of counseling is to make sure you understand how the loan works, your financial responsibilities, available alternatives, and what the reverse mortgage could mean for you and your family.

What Will the Counselor Discuss?

During your counseling session, the counselor will generally review:

Counseling Is Independent

The counselor is not employed by your lender or loan originator. HUD-approved counseling provides an independent opportunity to ask questions and make sure you understand the transaction before moving forward.

After counseling is successfully completed, you will receive a HECM Counseling Certificate that becomes part of your loan documentation.

I'll Help You Prepare

I can explain the reverse mortgage process beforehand, help you understand what information you'll need, and provide the appropriate resources for locating a HUD-approved HECM counseling agency.

Counseling is not a commitment to proceed with the loan. It is an important consumer-protection step designed to help you make an informed decision.

Is a HECM Reverse Mortgage Right for You?

A HECM may be worth considering if you are 62 or older, own your home, and want to explore ways to use your home equity as part of your retirement plan.

It may be particularly helpful if you want to:

Let's Look at Your Options

A reverse mortgage is an important financial decision, and it isn't the right solution for everyone.

I can prepare a personalized review showing:

There is no obligation to proceed. The goal is simply to give you the information you need to make an informed decision.

Ready to See What Your Home Equity Could Do for You?

REQUEST A COMPLIMENTARY HECM REVIEW

CONTACT GIDGET

HECM reverse mortgages are FHA-insured loans available to eligible homeowners age 62 and older. Borrowers remain responsible for property taxes, homeowners insurance, applicable property charges, maintaining the home, and meeting occupancy and other loan requirements. The loan balance increases over time as interest and applicable charges accrue. HECM counseling by a HUD-approved counseling agency is required before the loan can proceed.