Reverse Mortgages and HECM Loans: Eligibility, Costs and Responsibilities
A reverse mortgage is a home-secured loan that allows an eligible older homeowner to access part of the home’s equity.
The most common reverse mortgage is the FHA-insured Home Equity Conversion Mortgage, generally available to eligible homeowners age 62 or older who use the property as their principal residence.
A HECM generally does not require scheduled monthly principal-and-interest payments while the loan remains in good standing. However, the borrower must continue paying required property charges, maintaining the home and meeting the occupancy rules.
Reverse mortgage advances, interest, mortgage insurance and financed costs increase the loan balance over time and generally reduce home equity. Failure to meet taxes, insurance, maintenance, occupancy or other loan obligations can result in default and foreclosure.
HECM Eligibility Snapshot
Age
An FHA-insured HECM is generally available to eligible homeowners age 62 or older.
The age of the youngest borrower or Eligible Non-Borrowing Spouse can affect available proceeds.
Principal Residence
The property must be the borrower’s principal residence.
An FHA HECM is not a standard loan for:
- Investment property
- Second home
- Vacation property
- Fix-and-flip project
Home Equity
The borrower must:
- Own the home outright, or
- Have an existing mortgage and liens that can be paid at closing
A high payoff can reduce or eliminate cash available after closing.
Counseling
HUD-approved HECM counseling is required before the FHA-insured loan can proceed, except for a limited counseling waiver allowed for certain HECM refinances.
Financial Assessment
The lender reviews:
- Credit history
- Income
- expenses
- residual income
- property charges
- federal debt
- existing liens
- willingness and capacity to meet future obligations
Property Charges
The borrower must keep current:
- Property taxes
- Homeowners insurance
- Flood insurance when required
- HOA or condominium dues
- Ground rent when applicable
- Special assessments
- Other required charges
Property Condition
The borrower must maintain the property and complete required repairs.
2026 Maximum Claim Amount
For FHA case numbers assigned in calendar year 2026:
$1,249,125 nationwide
This is not the borrower’s guaranteed loan amount or cash proceeds.
Available Proceeds
The calculation can depend on:
- Youngest applicable age
- Interest rate
- Appraised value
- Existing mortgage payoff
- Closing costs
- set-asides
- first-year limits
- payment plan
What Is a Reverse Mortgage?
A reverse mortgage is a loan secured by a home.
The borrower receives loan advances rather than making scheduled monthly principal-and-interest payments.
The Balance Goes Up
The loan balance increases as the following are added:
- Cash advances
- Line-of-credit draws
- Monthly advances
- Interest
- FHA mortgage insurance
- Financed closing costs
- Servicing fees when applicable
- Other permitted charges
Equity Can Go Down
Home equity equals:
Home value minus debts secured by the home
As the reverse mortgage balance increases, remaining equity generally decreases unless home appreciation offsets the growth.
Home appreciation is not guaranteed.
The Borrower Retains Title
The lender does not become the owner at closing.
The borrower retains title, subject to:
- The HECM lien
- Loan obligations
- Payoff when due
- Foreclosure rights after default
It Is Not Free Money
A reverse mortgage must eventually be repaid.
Repayment commonly occurs through:
- Sale of the home
- Heirs’ payoff
- Refinance
- Other estate funds
- Voluntary borrower payoff
FHA HECM vs. Proprietary Reverse Mortgage
| Feature | FHA-Insured HECM | Proprietary Reverse Mortgage |
|---|---|---|
| Insurance | FHA insured | Private program |
| Typical Minimum Age | 62 | Lender- and state-specific |
| Maximum-Claim Framework | FHA nationwide amount | Private lender limit |
| Counseling | HUD-approved HECM counseling | Program- and state-specific |
| Property | Eligible principal residence | Program-specific |
| Payment Plans | FHA-defined | Private lender-defined |
| Non-Recourse | FHA program protection | Contract- and state-specific |
| Spouse Protection | HUD rules | Private program rules |
| Mortgage Insurance | FHA MIP | Private insurance or none |
| State Availability | FHA lender and licensing availability | Limited by lender |
| Best Fit | Standard FHA HECM profile | Higher-value or different private-program need |
Do Not Assume the Protections Are Identical
Before choosing a private reverse mortgage, compare:
- Non-recourse clause
- Spouse rights
- repayment triggers
- interest rate
- fees
- payment plans
- line-of-credit terms
- property eligibility
- heirs’ payoff
- servicing
- counseling
- foreclosure rights
How the Loan Balance and Home Equity Change
Beginning Balance
At closing, the balance can include:
- Existing mortgage payoff
- Initial cash advance
- Closing costs
- Initial FHA mortgage insurance
- Other financed obligations
Monthly Growth
The balance can grow through:
- Interest
- Annual mortgage insurance
- Servicing charge
- New advances
Voluntary Payments
The borrower may choose to make payments.
Possible benefits:
- Slow balance growth
- Preserve equity
- Reduce future payoff
- Replenish line-of-credit availability when the adjustable-rate plan permits
Ask the servicer how payments are applied.
Long-Term Effect
A longer loan duration can mean:
- More accumulated interest
- More mortgage insurance
- Larger payoff
- Less equity for sale or inheritance
Appreciation
Future home appreciation can increase property value but does not prevent the loan balance from growing.
2026 HECM Maximum Claim Amount
For FHA case numbers assigned from January 1 through December 31, 2026, the nationwide maximum claim amount is:
$1,249,125
This applies to all areas, including Alaska, Hawaii, Guam and the U.S. Virgin Islands.
The Maximum Claim Amount Is Not Cash Proceeds
The calculation can use the applicable lesser value under FHA rules, then apply:
- Principal-limit factor
- Age
- Expected rate
- Existing liens
- Mandatory obligations
- Closing costs
- set-asides
- first-year disbursement limits
A Home Worth More Than the Limit
When the appraised value exceeds the maximum claim amount, the FHA HECM calculation generally does not receive additional maximum-claim credit for the value above the nationwide amount.
A proprietary reverse mortgage may be considered, but the terms and protections differ.
Principal Limit, Net Proceeds and Cash Available
Maximum Claim Amount
The FHA amount used in the HECM calculation, subject to the applicable property-value or purchase-price rules.
Initial Principal Limit
The maximum potential proceeds established before disbursements and deductions.
It generally depends on:
- Age of youngest borrower or Eligible Non-Borrowing Spouse
- Expected interest rate
- Maximum claim amount
Mandatory Obligations
Potential items:
- Existing mortgage payoff
- Other liens
- Initial mortgage insurance
- Origination fee
- Closing costs
- Repair set-aside
- First-year property-charge payments
- Counseling fee when financed
- Other approved charges
Life Expectancy Set-Aside
A required or voluntary amount reserved for eligible property charges.
Net Principal Limit
The amount remaining after applicable set-asides.
Cash to Borrower
The actual amount available after:
- Payoffs
- fees
- set-asides
- first-year limits
- selected payment plan
No Universal Home-Value Percentage
Do not rely on “40%,” “60%” or “75% of value” until a complete calculation is performed.
First-Year HECM Disbursement Limit
FHA limits the amount available at closing and during the first 12 months.
The calculation generally uses the greater of:
- 60% of the Initial Principal Limit, or
- Mandatory obligations plus up to an additional 10% of the Initial Principal Limit
subject to the final FHA formula, set-asides and maximum proceeds.
Why This Matters
A borrower with a large existing mortgage may use most of the available proceeds to:
- Pay the mortgage
- Pay liens
- Finance closing costs
- Fund required property charges
The amount left as cash can be limited.
Lump Sum
A fixed-rate HECM generally disburses the permitted amount at closing and does not provide future line-of-credit advances.
Adjustable Rate
Unused proceeds may remain available under an approved line-of-credit or monthly-advance plan after applying the first-year restrictions.
HECM Payment Plans and Interest-Rate Types
Line of Credit
An adjustable-rate HECM can permit:
- Draws as needed
- Interest and fees on amounts advanced
- Remaining available credit
- Credit-line growth under the loan formula
- Future access subject to loan standing and servicing
Tenure Monthly Advance
A monthly advance while:
- At least one borrower occupies the home as a principal residence
- The loan remains in good standing
- Advances remain within the HECM terms
Term Monthly Advance
Monthly advances for a borrower-selected number of months.
Modified Tenure
Combination of:
- Monthly tenure advance
- Line of credit
Modified Term
Combination of:
- Monthly term advance
- Line of credit
Single-Disbursement Lump Sum
A fixed-rate HECM generally provides one permitted advance at closing.
Compare Cost
Drawing less at the beginning can reduce the amount on which interest and annual MIP accrue.
Drawing a larger lump sum can create a larger starting balance.
Reverse Mortgage Borrower Responsibilities
Occupy the Home
Use the property as the principal residence. Respond to annual occupancy-certification requests.
Pay Property Taxes
Late taxes can place the loan in default.
Maintain Insurance
Keep required:
- Homeowners insurance
- Flood insurance
- Other required property coverage
Pay Association Charges
Keep current:
- HOA dues
- Condominium fees
- Special assessments
- Ground rent when applicable
Maintain the Property
Complete:
- Required repairs
- Health and safety work
- Property maintenance
- Servicer-required corrective work
Respond to the Servicer
Open and answer:
- Annual occupancy letters
- Property-charge notices
- Repair notices
- Default notices
- Insurance requests
- Due-and-payable letters
Failure to meet these responsibilities can result in default and foreclosure.
HECM Financial Assessment and Life Expectancy Set-Aside
The lender must evaluate whether the borrower can meet ongoing obligations.
Financial Assessment Can Include
- Credit history
- Property-charge history
- Effective income
- Monthly expenses
- Residual income
- Property taxes
- Insurance
- HOA dues
- Federal debt
- Compensating factors
- Available assets
No Universal Credit Score
A HECM does not use one nationwide minimum credit score.
However:
- Late property charges matter
- Delinquent debt matters
- Federal debt matters
- Credit history matters
- Residual income matters
Life Expectancy Set-Aside
Possible outcomes:
- No LESA
- Voluntary fully funded LESA
- Required fully funded LESA
- Required partially funded LESA
Effect on Proceeds
A LESA can reduce:
- Cash at closing
- Line-of-credit capacity
- Monthly advance
- Remaining principal limit
Set-Aside Limitations
If the set-aside is exhausted or insufficient, the borrower can remain responsible for the property charges.
HUD-Approved HECM Counseling
An FHA-insured HECM generally requires counseling by a HUD-approved HECM counselor.
Counseling Topics
- How a reverse mortgage works
- Costs
- payment plans
- loan balance growth
- taxes and insurance
- property maintenance
- spouses
- heirs
- alternatives
- public benefits
- scams
- repayment
- foreclosure risk
Counseling Fee
The agency may charge a reasonable fee.
However:
- The fee must be disclosed before counseling
- The agency must waive it when the client cannot afford it
Counseling Is Independent
The counselor does not:
- Approve the loan
- Guarantee suitability
- Set the interest rate
- Choose the lender
- Represent the lender
Find a Counselor
Use HUD’s approved directory or call:
800-569-4287
Reverse Mortgage Costs and Total Loan Cost
Reverse mortgages are commonly more expensive than other home loans.
Upfront Costs
Potential charges:
- Origination fee
- Initial FHA mortgage insurance premium
- Appraisal
- Title search
- Title insurance
- Settlement
- Recording
- Survey
- Inspection
- Credit report
- Flood determination
- Counseling
- Mortgage taxes
- Repair administration
- Other state and third-party fees
HECM Origination Fee
FHA uses a formula based on the maximum claim amount.
The origination fee cannot exceed:
$6,000
Mortgage Insurance
Current HECM guidance generally includes:
- Initial MIP of 2% of the maximum claim amount
- Annual MIP of 0.5% of the outstanding balance
Ongoing Costs
- Interest
- Annual MIP
- Servicing fee when applicable
- Property taxes
- Homeowners insurance
- Flood insurance
- HOA dues
- Maintenance
- Special assessments
Financed Costs
When costs are financed:
- Less money is available for the borrower
- The costs become part of the balance
- Interest and annual MIP can accrue on the financed amount
Total Annual Loan Cost
Review the TALC disclosure at different assumed loan periods.
A reverse mortgage can be especially expensive when repaid after a short time.
HECM for Purchase
A HECM for Purchase allows an eligible borrower age 62 or older to buy a new principal residence.
Potential Uses
- Downsize
- Move closer to family
- Relocate
- Buy a more accessible home
- Buy a lower-maintenance property
- Reduce scheduled housing payments
Borrower Funds Required
The borrower generally must pay:
- Difference between purchase price and HECM proceeds
- Closing costs not financed or paid by permitted contributions
- Required reserves
- Other approved amounts
Not 100% Financing
A substantial borrower investment can be required.
Principal Residence
The new home must satisfy the HECM principal-residence requirement.
Property Eligibility
Not every property is eligible.
No Scheduled Monthly Principal and Interest
The borrower still must:
- Pay taxes
- maintain insurance
- pay association charges
- maintain the property
- occupy it as the principal residence
Rescission
Do not assume a HECM for Purchase can be cancelled after closing.
Spouse, Co-Borrower and Household-Member Rules
Co-Borrower
A co-borrower:
- Is obligated on the loan
- Can remain if the other borrower dies or leaves
- Can continue to access available proceeds under the plan
- Must meet the loan obligations
Eligible Non-Borrowing Spouse
An Eligible Non-Borrowing Spouse may be able to remain after the borrower dies or enters a healthcare facility for more than 12 consecutive months.
Requirements can include:
- Married at HECM closing
- Identified in the loan documents
- Principal-residence occupancy
- Continued compliance
- Annual certifications
- Title and legal requirements
- No new advances after the borrower’s death
Ineligible Non-Borrowing Spouse
An ineligible spouse can have no deferral protection.
Other Family Members
Children, relatives and caregivers who are not borrowers generally do not receive a right to remain after the loan becomes due.
Plan Before Closing
Discuss:
- Who is on title
- Who is a borrower
- Who is a non-borrowing spouse
- Age difference
- proceeds effect
- future healthcare
- estate plan
- heirs’ ability to pay off the loan
- Who can remain in the home?
When Does a Reverse Mortgage Become Due and Payable?
A HECM generally becomes due when the last protected borrower or Eligible Non-Borrowing Spouse:
- Dies
- Sells the home
- Permanently moves
- No longer uses the home as the principal residence
It can become due sooner after default involving:
- Unpaid taxes
- Lapsed insurance
- Unpaid property charges
- Failure to maintain the home
- Failure to complete required repairs
- Occupancy violation
- Other loan-term violation
Healthcare Facility
An absence of more than 12 consecutive months in a healthcare facility can cause the home to no longer qualify as the borrower’s principal residence.
Voluntary Sale
The borrower can sell the home at any time. Sale proceeds are used to pay:
- Reverse mortgage balance
- Other liens
- Selling costs
- When the loan must be repaid
- Selling a home with a reverse mortgage
Remaining equity belongs to the borrower.
Heirs and HECM Non-Recourse Protection
If the Home Is Worth More Than the Loan
Heirs can:
- Sell the home
- Repay the HECM
- Keep remaining proceeds
If Heirs Want to Keep the Home
They generally can satisfy the HECM by paying the lesser of:
- Full loan balance
- 95% of the appraised value
under applicable HECM servicing requirements.
They may need:
- Cash
- New mortgage
- Estate funds
- Other financing
If the Loan Exceeds the Home Value
FHA mortgage insurance can cover the eligible shortfall when the property is transferred under program requirements
Due-and-Payable Notice
Heirs should contact the servicer immediately.
Possible steps:
- Request payoff
- Obtain appraisal information
- List the property
- Apply for financing
- Request extension
- Provide estate documents
Extensions
Extensions may be available, but they are not automatic.
Estate Planning
Discuss the HECM with:
- Spouse
- children
- heirs
- attorney
- financial advisor
Reverse Mortgage Tax and Benefit Considerations
Federal Income Tax
Reverse mortgage advances generally are not taxable income.
They are loan proceeds.
Interest Deduction
Accrued reverse mortgage interest generally is not deductible until actually paid.
The deduction can be limited based on:
- Use of proceeds
- Home-equity-debt rules
- Itemization
- Qualified debt limits
- Current law
Social Security Retirement
Loan proceeds generally are not wages or earnings.
Medicare
Medicare eligibility generally is not based on ordinary asset limits, but premiums and related programs can have separate income rules.
SSI and Medicaid
Funds retained after receipt can become countable resources and affect asset-tested eligibility.
State Medicaid rules vary.
Benefit Planning
Before a large lump sum:
- Contact the benefits program
- Ask about resource limits
- Ask when funds become countable
- Keep records
- Coordinate spending
- Avoid relying only on a lender’s statement
- Reverse mortgage tax treatment
Possible Uses and Important Risks
Potential Uses
- Pay off an existing mortgage
- Supplement monthly cash flow
- Create a line of credit
- Home repairs
- Accessibility modifications
- Medical costs
- Long-term-care planning
- Debt payoff
- HECM for Purchase
- Emergency reserve
- Family support
- Other lawful purposes
Existing Mortgage Payoff
Paying off the forward mortgage can remove its scheduled monthly payment.
The debt is not erased.
It becomes part of the growing HECM balance.
Debt Consolidation
Consider:
- Existing debt cost
- HECM upfront cost
- Balance growth
- property-charge obligation
- home-equity reduction
- heirs
- expected time in home
Home Repairs
Compare:
- Local repair grants
- property-tax programs
- home equity loan
- HELOC
- contractor financing
- renovation loan
- reverse mortgage
Investment and Annuity Sales
Do not obtain a HECM solely to purchase:
- Annuity
- Investment product
- Cryptocurrency
- High-risk security
- Business opportunity
Reverse mortgage loan officers are not permitted to cross-sell certain financial products as part of the HECM transaction.
Scam Warning
Avoid anyone who:
- Claims the loan is a government benefit
- Says HUD selected the lender
- Pressures immediate signing
- Wants power of attorney
- Wants control of proceeds
- Guarantees investment returns
- Tells you not to speak with family or counselor
- Uses a contractor to direct the loan
- Asks you to transfer title
- Avoid reverse mortgage scams
Eligible Property and Appraisal Review
Potentially eligible HECM property types can include:
- One-unit principal residence
- Two- to four-unit property with borrower occupancy
- Eligible condominium unit
- Eligible manufactured home
- Selected cooperative property under applicable current requirements
Appraisal Review
The FHA appraisal evaluates:
- Market value
- property condition
- safety
- soundness
- security
- FHA eligibility
- required repairs
Repairs
Possible treatment:
- Complete before closing
- Approved repair set-aside
- Additional inspection
- Property ineligible
Existing Liens
The lender reviews:
- First mortgage
- HELOC
- tax liens
- judgment liens
- solar financing
- PACE assessment
- reverse mortgage
- other recorded debt
Insurance
The borrower must obtain and maintain required coverage.
Additional project, title, foundation and property rules can apply.
Compare Retirement Home-Equity Options
| Option | Scheduled Monthly Principal and Interest | Rate Type | Existing Mortgage | Upfront Cost | Equity Effect | Main Risk |
|---|---|---|---|---|---|---|
| FHA HECM | Generally none while in good standing | Fixed or adjustable | Paid off at closing | Often high | Balance grows | Taxes, insurance, maintenance and foreclosure |
| Proprietary Reverse Mortgage | Program-specific | Program-specific | Program-specific | Program-specific | Balance grows | Fewer standardized FHA protections |
| HELOC | Required payment | Usually variable | Remains | Product-specific | Balance increases when drawn | Payment increase and foreclosure |
| Home Equity Loan | Required payment | Often fixed | Remains | Product-specific | Immediate second lien | Two payments and foreclosure |
| Cash-Out Refinance | Required payment | Fixed or adjustable | Replaced | Applies to full loan | New amortizing balance | Payment and rate on full balance |
| Sell and Downsize | No mortgage if bought with cash | Not applicable | Paid at sale | Selling and moving cost | Converts equity to cash | Relocation and housing-market risk |
| HECM for Purchase | Generally no scheduled P&I | Fixed or adjustable | New HECM | Higher purchase cash requirement | Equity committed to purchase | Property charges and future payoff |
| No New Loan | None from new financing | Not applicable | Existing terms continue | None | Preserves current structure | Cash-flow need remains |
Compare Based on
- Time expected in the home
- Cash needed
- Existing mortgage
- Property charges
- Health
- Long-term-care plans
- Spouse
- Heirs
- Benefits
- Closing costs
- Total annual loan cost
- Desire to preserve equity
- Explore HELOC options
- Explore fixed-rate second mortgages
- Explore refinance options
- Explore renovation and repair financing
- Review debt-consolidation mortgage options
Documents Needed for a Reverse Mortgage Review
The exact checklist is borrower- and property-specific.
Identity and Age
Potential items:
- Government-issued ID
- Social Security card or verification
- Date-of-birth evidence
- Citizenship or eligible residency documents
Ownership and Occupancy
Potential items:
- Deed
- title
- trust
- occupancy evidence
- utility bill
- homestead record
- property-tax bill
- annual occupancy certification
Spouse and Household
Potential items:
- Marriage certificate
- divorce decree
- death certificate
- spouse ID
- non-borrowing spouse documents
- title documents
- household-member information
Income and Financial Assessment
Potential documents:
- Social Security award letter
- pension statement
- retirement distributions
- annuity income
- bank statements
- investment statements
- tax returns when required
- property-charge history
- debt statements
- federal-debt documentation
Existing Mortgage and Liens
Potential items:
- Mortgage statement
- HELOC statement
- payoff
- tax lien
- judgment
- solar agreement
- PACE assessment
- assistance lien
- federal debt repayment plan
Property
Potential items:
- Homeowners insurance
- flood insurance
- HOA statement
- condo documents
- manufactured-home title and foundation documents
- trust
- property-tax bill
- repair records
- appraisal access
Counseling
- HUD-approved HECM counseling certificate
Estate and Authority
Potential items:
- Trust certification
- power of attorney
- guardianship
- conservatorship
- court order
- attorney opinion
- entity documents
Secure Submission
Use the approved secure mortgage portal.
Do not email passwords, unencrypted Social Security numbers, full bank records or powers of attorney through an unsecured channel.
How to Evaluate and Apply for a HECM?
Define the Goal
Identify:
- Existing mortgage payoff
- Monthly cash flow
- Line of credit
- Home repair
- HECM for Purchase
- Debt payoff
- Healthcare planning
- Emergency reserve
- Estate objective
Review Alternatives
Compare:
- No loan
- Refinance
- HELOC
- home equity loan
- sale and downsizing
- local assistance
- HECM
- proprietary reverse mortgage
Discuss Spouse and Heirs
Determine:
- Borrowers
- non-borrowing spouse
- household members
- title
- future occupancy
- heirs’ plan
- long-term care
Complete HUD-Approved Counseling
Counseling must occur through an approved HECM agency.
Complete the Application
Provide accurate:
- Identity
- age
- occupancy
- marital status
- income
- assets
- expenses
- federal debt
- property
- liens
- insurance
Financial Assessment
The lender evaluates:
- Credit
- residual income
- property-charge history
- ongoing obligations
- LESA requirement
- federal debt
Title and Lien Review
The lender verifies:
- Ownership
- trust
- spouse
- liens
- payoff
- judgments
- taxes
- legal authority
FHA Appraisal
The appraiser evaluates:
- Value
- condition
- required repairs
- property eligibility
Calculate Proceeds
The lender calculates:
- Maximum claim amount
- principal limit
- mandatory obligations
- set-asides
- first-year limit
- net proceeds
- payment plan
Compare Rate and Payment Plan
Review:
- Fixed versus adjustable
- index
- margin
- expected rate
- maximum rate
- lump sum
- line of credit
- monthly advance
- total annual loan cost
Review Disclosures
Review:
- Good Faith Estimate
- HUD settlement statement
- Truth-in-Lending
- TALC
- amortization projection
- loan agreement
- note
- mortgage
- rescission
- payment plan
- repair or LESA documents
Close
Sign only after understanding:
- Costs
- loan balance growth
- property obligations
- spouse rights
- heirs’ options
- repayment triggers
Complete Rescission When Applicable
Most non-purchase reverse mortgages generally provide a three-business-day right to cancel.
Work With the Servicer
After closing:
- Review statements
- pay property charges
- maintain insurance
- complete repairs
- return occupancy certifications
- monitor available proceeds
- update contact information
Start Your Reverse Mortgage Review
A personalized review can help determine:
- Preliminary HECM eligibility
- Age and spouse considerations
- Principal-residence requirements
- Existing mortgage payoff
- 2026 maximum claim amount
- Preliminary principal limit
- First-year disbursement limits
- Estimated net proceeds
- Fixed or adjustable options
- Line of credit or monthly advances
- Financial-assessment considerations
- Potential LESA
- Property and appraisal requirements
- HECM for Purchase
- Proprietary alternatives
- Costs and TALC considerations
- Heirs and estate questions
- Documents needed to proceed
An FHA-insured HECM is a loan, not a government benefit or free money. The loan balance increases over time and generally reduces home equity. Borrowers must occupy the home as their principal residence, pay required property charges, maintain insurance and keep the property in good repair. Failure to meet the obligations can result in default and foreclosure. All loans are subject to borrower, spouse, financial-assessment, property, appraisal, title, counseling and underwriting approval. Proceeds, costs, rates, payment plans, set-asides and availability vary. This information is educational and is not legal, tax, benefits, estate-planning or financial advice or a commitment to lend. Equal Housing Opportunity.
Frequently Asked Questions
What is a reverse mortgage?
It is a home-secured loan that allows an eligible older homeowner to receive loan advances while the loan balance grows over time.
What is a HECM?
A Home Equity Conversion Mortgage is an FHA-insured reverse mortgage generally available to eligible homeowners age 62 and older.
Is a reverse mortgage free money?
No.
It is a loan that must be repaid, usually through sale of the home, refinance, estate funds or heirs’ payoff.
Does the lender own my home?
No.
You retain title, subject to the mortgage lien and loan obligations.
Do I make monthly mortgage payments?
A HECM generally does not require scheduled monthly principal-and-interest payments while it remains in good standing.
You must continue paying required property charges and maintaining the home.
Can I lose my home?
Yes.
Failure to meet taxes, insurance, maintenance, occupancy or other obligations can result in foreclosure.
What age is required?
An FHA HECM is generally for eligible homeowners age 62 or older.
The youngest borrower or Eligible Non-Borrowing Spouse can affect proceeds.
Can a younger spouse live in the home?
Potentially.
The spouse’s status as a co-borrower, Eligible Non-Borrowing Spouse or ineligible resident determines available protections.
Must the home be my primary residence?
Yes for an FHA HECM.
Can I use a HECM on an investment property?
No.
A standard FHA HECM is for an eligible principal residence.
How much can I borrow?
The principal limit depends on age, interest rate, property value, FHA maximum claim amount and other factors.
Net proceeds are reduced by liens, costs and set-asides.
What is the 2026 HECM maximum claim amount?
It is $1,249,125 for FHA case numbers assigned in calendar year 2026.
This is not guaranteed cash proceeds.
Can I receive all the money at closing?
Not necessarily.
The initial disbursement limit restricts access during the first 12 months.
What payment options are available?
An adjustable-rate HECM may offer a line of credit, term payments, tenure payments or combinations.
A fixed-rate HECM generally provides a permitted single lump sum.
What is line-of-credit growth?
Unused available credit may grow under the adjustable-rate HECM formula.
It is not investment income or home appreciation.
Is the interest rate fixed?
HECMs can use fixed or adjustable rates.
The available payment plans differ.
Does a HECM require income or credit review?
Yes.
The lender performs a financial assessment of income, expenses, credit, property charges and residual income.
Is there a minimum credit score?
There is no single nationwide HECM score requirement.
Credit and property-charge history still matter.
What is a LESA?
A Life Expectancy Set-Aside reserves part of the HECM proceeds for eligible property charges.
Is counseling required?
Yes for most FHA HECMs.
A limited waiver may be available for certain HECM refinances.
How much does counseling cost?
The fee varies by agency.
It must be waived if the client cannot afford it.
Are proceeds taxable?
Reverse mortgage advances generally are not taxable income because they are loan proceeds.
Does it affect Social Security or Medicare?
Loan proceeds generally are not wages or taxable income.
However, retained funds can affect asset-tested programs, including SSI or Medicaid.
Is reverse mortgage interest deductible?
Accrued interest generally is not deductible until it is actually paid, and other limits can apply.
What costs apply?
Potential costs include origination, FHA mortgage insurance, appraisal, title, recording, counseling and other third-party charges.
Interest and annual MIP are added over time.
Can I pay off my current mortgage?
Yes, if the HECM proceeds and any borrower funds are sufficient.
The current mortgage generally must be paid at closing.
Can I buy a home with a HECM?
Yes, through HECM for Purchase for an eligible principal residence.
The borrower must bring the required difference and closing funds.
Can I refinance an existing HECM?
Potentially.
The new loan must provide an eligible benefit and justify the new costs.
What happens if I move?
The HECM generally becomes due when the home is no longer the principal residence.
What if I enter a nursing home?
An absence of more than 12 consecutive months in a healthcare facility can cause the loan to become due unless a protected co-borrower or Eligible Non-Borrowing Spouse remains.
What happens when I die?
The servicer issues a due-and-payable notice after the last protected borrower or spouse dies.
Heirs can sell, pay off or surrender the home under applicable rules.
Can heirs keep the home?
Yes, if they satisfy the payoff requirements.
They may need cash or a new mortgage.
What if the loan exceeds the home value?
HECM non-recourse protection and FHA insurance can cover the eligible shortfall when program sale or payoff rules are followed.
Can I cancel the loan?
Most non-purchase reverse mortgages generally have a three-business-day right of rescission.
HECM for Purchase generally does not have the same post-closing cancellation right.
How long does closing take?
There is no universal timeline.
Counseling, financial assessment, appraisal, title, repairs, spouse status and underwriting affect timing.
Is a reverse mortgage guaranteed?
No.
Eligibility and proceeds remain subject to borrower, property, counseling, financial-assessment, appraisal, title and underwriting requirements.
Reviewed by Rodney Rose
Loan Officer / Branch Manager
NMLS #1396861 · DRE #00853403
E Mortgage Capital, Inc. · NMLS #1416824
Rodney Rose helps older homeowners and families compare FHA-insured HECMs, HECM for Purchase, proprietary reverse mortgages, home-equity financing, refinancing and other retirement housing strategies.
Last reviewed: July 25, 2026
- 915 Highland Pointe Dr, Roseville, CA 95678
- 3401 Mallory Ln, Franklin, TN 37067
- 3750 S Susan Street, Santa Ana, Ca. 92704