Understanding Reverse Mortgage (HECM)
A reverse mortgage lets homeowners age 62 and older borrow against their home's equity without making monthly mortgage payments for as long as they live in the home and meet the loan's obligations. The most common type is the Home Equity Conversion Mortgage (HECM), which is insured by the Federal Housing Administration and made by private lenders.
Funds can be received as a lump sum, monthly payments, a line of credit, or a combination. Instead of the balance going down over time as with a traditional mortgage, it grows as interest and fees are added. The loan is repaid when the last borrower sells the home, permanently moves out or passes away.
A reverse mortgage is a significant decision. Jake encourages borrowers to involve family members and to take the required counseling session seriously.
Who it's a good fit for
- Homeowners 62 and older with substantial equity who plan to stay in their home
- Retirees who want to eliminate an existing monthly mortgage payment
- Buyers 62 and older purchasing a home that better fits retirement (HECM for Purchase)
- Homeowners who want an available line of credit as part of a retirement plan
Key details
- You must live in the home as your primary residence.
- You must keep paying property taxes, homeowners insurance and any HOA dues, and maintain the home. Failing to meet these obligations can cause the loan to become due.
- Before applying, you must complete a counseling session with an independent, HUD-approved housing counselor.
- The amount available depends on the age of the youngest borrower or eligible non-borrowing spouse, the home's value up to the FHA limit, and current interest rates.
- HECMs carry an upfront and annual FHA mortgage insurance premium plus closing costs, which reduce the equity left over time.
- A HECM is a non-recourse loan: when the home is sold to repay it, neither you nor your heirs will owe more than the loan balance or the home's value, whichever is less.
Reverse Mortgage questions
Do I still own my home with a reverse mortgage?
Yes. You keep the title to your home. The lender places a lien on it, just like a traditional mortgage.
Can I lose my home with a reverse mortgage?
Yes, if you don't meet the loan's obligations. Not paying property taxes or homeowners insurance, not maintaining the home, or moving out for more than 12 consecutive months can cause the loan to become due.
What happens to the home when I pass away?
Your heirs can sell the home and keep any remaining equity, pay off the loan to keep the home, or turn the home over to the lender. HUD rules give heirs time to decide. Because the loan is non-recourse, they won't owe more than the home's value.
Is a reverse mortgage a government loan?
A HECM is insured by the FHA, but the loan itself comes from a private lender. Separate proprietary reverse mortgages, not insured by FHA, also exist for higher-value homes.
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Related programs
Mortgage Refinance
Replace your current mortgage to change your rate, term or loan type.
Learn moreCash-Out Refinance
Refinance for more than you owe and receive the difference in cash.
Learn moreHome Equity Line of Credit (HELOC)
A revolving credit line secured by your home that you draw on as needed.
Learn moreThese materials are not from, and were not approved by, HUD, FHA or any other government agency. Borrowers must be at least 62 years old, occupy the home as their primary residence, and remain current on property taxes, homeowners insurance and home maintenance. The loan becomes due when the last borrower no longer lives in the home or fails to meet loan obligations. Interest accrues and the loan balance grows over time.
Information on this page is general and educational. Loan approval, terms and eligibility depend on your full application, credit, property and current program guidelines.