A reverse mortgage lets homeowners 62 and older borrow against their home's equity without a required monthly mortgage payment. Instead of paying the lender each month, the loan balance grows, and the loan is repaid later, usually when the home is sold after the last borrower moves out or passes away.
What is a HECM?
A Home Equity Conversion Mortgage (HECM) is the reverse mortgage insured by the Federal Housing Administration (FHA). Nearly all reverse mortgages in the U.S. are HECMs. The program rules come from HUD (24 CFR Part 206). Banks and lenders, not the government, make the loans. Private “jumbo” reverse mortgages also exist for higher-value homes, with different rules.
How much can you borrow?
The amount available is called the principal limit. It's figured from three things:
- Age of the youngest borrower or eligible non-borrowing spouse. Older means more.
- Home value, up to the 2026 HECM limit of $1,249,125 (or the purchase price, if you're buying).
- Interest rates at the time. Lower expected rates mean more.
Any existing mortgage, the closing costs you choose to finance and any required set-asides come out first. In the first 12 months you can generally take the greater of 60% of the principal limit, or what's needed to pay off existing mortgages and liens plus 10%.
How do you receive the money?
As a lump sum (fixed rate), monthly payments for life or a set term, a line of credit that grows if unused, or a combination. Compare payout options.
What do you still have to pay?
No monthly mortgage payment is required. You still pay property taxes, homeowners insurance (and flood insurance if needed), HOA dues, and keep the home in good repair. You can make voluntary payments any time, with no prepayment penalty.
When does the loan have to be repaid?
- When the last borrower passes away, unless an eligible non-borrowing spouse remains in the home
- When you sell or transfer the home
- When no borrower lives in the home as a primary residence, including being away more than 12 months in a row for health reasons
- If taxes, insurance or maintenance obligations aren't met
The loan is usually repaid by selling the home. Because HECMs are non-recourse, you or your heirs never owe more than the home is worth. What happens to heirs and spouses.
The steps, from first call to closing
- Talk it through and get an estimate.
- HUD-approved counseling with an independent agency, usually by phone.
- Apply, including a financial assessment of credit, income and tax and insurance history.
- FHA appraisal of the home.
- Underwriting and closing. For a refinance of a home you own, you get three business days to change your mind after signing.