Reverse Mortgages
Home Equity Conversion Mortgage (HECM)


With reverse mortgages, including HECMs, your total debt increases over time. You should be aware of this and other reverse mortgage considerations before proceeding with a reverse mortgage.


HECM Description

A Home Equity Conversion Mortgage (HECM) is a reverse mortgage made by private lenders that is insured by the Federal Housing Administration (FHA), part of the U.S. Department of Housing and Urban Development (HUD). With a HECM, you have multiple options for receiving payments, with no limitations on how you use the money. You can use a HECM to pay for medical expenses, to supplement your social security or retirement income, for house repairs, travel, or any other living expenses.  The money is usually tax-free (always confirm your individual tax circumstances with an accountant or attorney), but it may count as income for Medicaid eligibility or other state assistance programs.

The borrower remains the owner of the home and may sell it and move at any time, keeping the sales proceeds that exceed the mortgage balance. If the mortgage balance grows to exceed the value of the property, a borrower cannot be forced to sell the home to pay off the mortgage (as long as the borrower continues to pay their property taxes, homeowners insurance, and other home expenses).

A HECM loan need not be repaid until the borrower moves, sells, or dies (a borrower can live in a nursing home or other medical facility for up to 12 months before the loan becomes due and payable). When the loan must be paid, you or your estate will repay the cash you received from the reverse mortgage, plus interest and other fees, to the lender. The remaining equity in your home, if any, belongs to you or to your heirs.  If the loan balance exceeds the value of the property, the borrower (or the heirs) will owe no more than the value of the property. FHA insurance will cover any balance due the lender. None of your other assets (including personal checking or savings accounts) will be affected by HUD's reverse mortgage loan, and this debt will never be passed along to your estate or heirs.

HECM Eligibility

To be eligible for HECM loan, you must:

  • Be 62 years of age or older
  • Own your home free and clear or have a low mortgage balance that can be paid off at closing with proceeds from the HECM loan
  • Live in the home as the primary residence
  • Complete a HECM counseling session with a HUD-approved reverse mortgage counselor

There are no income, asset, credit or medical qualifications required, and closing costs may be financed in the mortgage.

An eligible property can be a single-family detached home, a townhouse, a one- to four-unit building with one unit occupied by the borrower, a manufactured home (mobile home), a unit in an FHA-approved condominium or cooperative, or a unit in a planned unit development. The property must be in reasonable condition and meet FHA standards, but the owner can pay for repairs using the reverse mortgage.

There are no limits on the value of homes qualifying for a HUD reverse mortgage, but the amount that may be borrowed is capped by the maximum FHA mortgage limit for the area, which varies from $172,632 to $312,895 (see HECM Loan Amount and Application).

Before applying for a HECM, the program requires that you receive free reverse mortgage housing counseling from an independent HUD-approved reverse mortgage counseling agency ( toll-free 1-800-569-4287). The counselor must explain the loan’s costs, financial implications, and alternatives. For example, counselors should tell you about government or nonprofit programs for which you may qualify, and any single-purpose or proprietary reverse mortgages available in your area.

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The information provided in this website is not legal advice and should not be interpreted as legal advice. This website is intended to provide a basic understanding of this information in summary form. This information may not be comprehensive, is subject to change, and may not apply to all individual circumstances. Any information received here should be confirmed with the appropriate government agencies or with an attorney, particularly as it relates to your individual circumstances. Your use of this website indicates your agreement to be bound by our Terms of Use.