Reverse Mortgage (HECM)
Convert home equity to cash without monthly payments for homeowners 62 and older.
Overview
A reverse mortgage, most commonly the FHA-insured Home Equity Conversion Mortgage (HECM), allows homeowners aged 62 and older to convert their home equity into cash without making monthly mortgage payments. Instead of paying the lender, the lender pays you — as a lump sum, monthly payments, a line of credit, or a combination. The loan balance grows over time as interest accrues, and repayment is required only when the borrower sells the home, moves out permanently, or passes away. Borrowers must continue paying property taxes, homeowners insurance, and maintain the property. The loan is non-recourse, meaning you or your heirs will never owe more than the home's value at the time of repayment.
Best For
- Retirees who want to age in place
- Seniors needing supplemental income
- Homeowners 62+ with significant equity
- Those wanting to eliminate existing mortgage payments
Pros
- No monthly mortgage payments required
- Receive cash from your home equity
- Stay in your home as long as you live there
- Non-recourse (never owe more than home value)
- Multiple payout options (lump sum, monthly, line of credit)
- FHA-insured (HECM) protects borrowers
Cons
- Loan balance grows over time (negative amortization)
- High upfront costs (origination fee, MIP, closing costs)
- Reduces inheritance for heirs
- Must maintain property taxes, insurance, and upkeep
- Complex product with many rules
- Limits ability to move or downsize easily
Requirements
- Borrower must be 62 years or older
- Home must be primary residence
- Must own home outright or have substantial equity
- Complete HUD-approved counseling session
- Meet financial assessment requirements
- Property must meet FHA standards