HECM Reverse Mortgage

A HECM (Home Equity Conversion Mortgage) is the federally-insured reverse mortgage program administered by the FHA and regulated by HUD. It lets homeowners age 62 and older convert a portion of their home equity into cash, as a lump sum, a line of credit, monthly payments, or a combination, without making monthly mortgage payments. The loan balance grows as interest accrues and becomes due when the borrower sells, permanently moves out, or passes away.

An unused HECM line of credit grows over time at the same rate charged on the loan, independent of what happens to your home's value. The longer you wait to draw on it, the more becomes available. This makes the HECM LOC one of the most effective retirement buffer tools available: in down markets you can draw on home equity instead of selling investments at a loss. Wade Pfau's research found that establishing a HECM line of credit early raised 30-year portfolio survival probability from 68% to 93%.

No monthly mortgage payment is required on a HECM. You remain responsible for property taxes, homeowner's insurance, and routine maintenance, the same obligations you'd have with or without a mortgage. The loan balance grows as interest accrues, and the loan becomes due only when you sell, permanently move out, or pass away. You may make voluntary payments at any time, but they are never required.

The FHA HECM lending limit for 2026 is $1,249,125, a single national figure that applies in every U.S. county, and the tenth consecutive annual increase. The HECM calculates available equity up to this ceiling regardless of actual home value, so for homes valued well above the limit, a jumbo or proprietary reverse mortgage may access more of your equity and should be evaluated alongside the HECM.

Yes. HUD requires all HECM borrowers to complete an independent counseling session with a HUD-approved counselor before the application can proceed. The counselor is a neutral third party with no financial relationship to your lender. Sessions typically cost about $125 to $200 and can often be completed by phone. The requirement protects borrowers and ensures the decision is made with full, unbiased information.

Yes. The HECM is a non-recourse loan, meaning neither you nor your heirs can ever owe more than the home's fair market value when the loan is repaid, even if the balance has grown beyond the home's worth. FHA mortgage insurance covers any difference. When the borrower passes away, heirs typically have 6 to 12 months to settle, most commonly by selling the home. Any remaining equity belongs to the heirs, and if they want to keep the home they can refinance or pay the lesser of the loan balance or 95% of appraised value.

Yes. You do not need to own your home free and clear. Any existing mortgage is paid off at closing, from your own funds or from the HECM proceeds, and the HECM takes first-lien position. Whatever remains after the existing loan is paid off becomes your available equity. If your current balance is large relative to home value, the net equity remaining may be limited. A no-cost evaluation will run the exact numbers for your situation.

HECM closing costs typically include an origination fee (capped at the greater of $2,500 or 2% of the first $200,000 of home value plus 1% above that, maximum $6,000), an upfront FHA mortgage insurance premium, third-party costs (appraisal, title, recording), and the counseling fee. Total closing costs commonly range from about $5,000 to $20,000 depending on home value, and can typically be financed into the loan rather than paid out of pocket.

No. HECM proceeds are loan proceeds, not income, so they do not affect regular Social Security retirement benefits or Medicare. They may affect needs-based programs such as Medicaid and SSI if proceeds are not spent within the month received, because accumulated funds can count as a countable asset under those programs' strict limits. If you receive or expect to apply for Medicaid or SSI, consult an elder law attorney before taking proceeds.