The HECM Reverse Mortgage

The HECM is the reverse mortgage. When you see an ad, read an article, or hear someone at church say "my neighbor got a reverse mortgage," it's almost always a HECM.

HECM stands for Home Equity Conversion Mortgage. It's insured by FHA and governed by HUD's rules. ZYNG is a mortgage broker, not affiliated with HUD or FHA, and we arrange HECMs through the lenders we work with.

This page covers who a HECM fits, how it works, what it takes to qualify, what it costs, and how it compares with the other reverse mortgage options.

The short version

• Who it's for: homeowners 62 and older who live in the home and have meaningful equity.
• How you get the money: line of credit, monthly payouts, lump sum, or a mix.
• What you pay: no required monthly mortgage payments. You must continue to pay property taxes and homeowners insurance, maintain the home, and meet the other loan terms.
• The protections: independent counseling, a financial assessment, non-recourse, a line of credit that can't be frozen, and protection for an eligible spouse.
• The costs: an origination fee capped by HUD, FHA mortgage insurance, and normal closing costs.
• The alternatives: a HECM for Purchase if you're buying, a fixed-rate HECM if you need it all now, or a proprietary jumbo program if your home is high-value.

Who a HECM fits

In my experience, the HECM fits best when you:

• Plan to stay in your home for years. The upfront costs make more sense the longer you keep the loan.
• Want flexibility. The adjustable HECM has more ways to take money than almost any other loan.
• Want a safety net. A growing line of credit the lender can't freeze or cancel, as long as you meet the terms.
• Have a home at or below the HECM limit, or not far above it. See Lending Limits.
• Value federal protections for yourself, your spouse, and your heirs.

It's usually a poor fit if you'll move soon, if you're struggling to keep up with taxes and insurance already, or if leaving the house free and clear is your top goal. See Reverse Mortgage Pros and Cons.

How a HECM works

Here's the short tour. For the full mechanics, read How a Reverse Mortgage Works.

1. HUD sets your principal limit, the total you can borrow, from the youngest borrower's or eligible non-borrowing spouse's age, the expected rate, and your home's value up to the HECM limit.
2. Anything you owe on the home is paid off first, along with closing costs you finance.
3. In the first year, HUD limits what you can take: the greater of 60 percent of your principal limit, or your mandatory obligations plus 10 percent.
4. You choose how to take the rest: a line of credit, tenure or term payouts, a modified plan, or (on a fixed-rate loan) one lump sum.
5. Each month, interest and FHA mortgage insurance are added to your balance. On an adjustable loan, your unused line of credit grows at the same rate.
6. The loan comes due when the last borrower dies, sells, or moves out for good, or if the loan terms aren't met.
7. It's repaid, usually from the sale of the home. You or your heirs keep any equity left, and you don't owe more than the home is worth.

Requirements, in plain language

The borrowers

• Every borrower must be at least 62. If your spouse is younger, they can be an eligible non-borrowing spouse. See the Non-Borrowing Spouse guide.
• You must live in the home as your primary residence, and keep living there.
• No delinquent federal debt, like a defaulted federal student loan or unpaid federal taxes, unless it's paid at closing or you're on an approved plan.
• Counseling. You meet with an independent, HUD-approved counselor before you apply. A non-borrowing spouse must attend too. See Reverse Mortgage Counseling.
• The financial assessment. The lender reviews your credit, income, and history of paying property taxes and insurance. There's no HUD minimum credit score. Most of the people I work with pass, because we work hard with borrowers to explain credit problems and extenuating circumstances the right way. See Reverse Mortgage Financial Assessment.

The home

Eligible homes generally include:

• Single-family homes.
• Two to four unit homes, if you live in one of the units.
• Condos in an FHA-approved project, or with single-unit approval.
• Manufactured homes built after June 15, 1976 that meet HUD's standards and sit on a permanent foundation.
• Townhomes and planned unit developments.

The home has to meet FHA's property standards. If the appraiser finds repairs, some can be done after closing with money set aside, and some have to be done first.

The equity

You need enough equity that the principal limit covers your existing mortgage and closing costs. If it doesn't, you can bring cash to closing to make up the difference. See Does my home need to be paid off? and, if you have a newer loan or HELOC, Lien Seasoning Requirements.

Costs to expect

I'll lay these out on every quote, line by line. Here's what you'll see:

• Origination fee. HUD caps it with a formula based on your maximum claim amount, which is your home's value (or the price, if you're buying and it's lower) up to the HECM limit. A lender credit can lower it.
• Upfront FHA mortgage insurance, based on the maximum claim amount.
• Annual FHA mortgage insurance, added to your balance monthly.
• Third-party closing costs: appraisal, title insurance, escrow, recording, and similar fees.
• Counseling fee, if your counseling agency charges one.
• Interest, added to your balance monthly.
• No monthly servicing fee from ZYNG. HUD allows one on a HECM, but we choose not to charge it.

Most of these can be paid from the loan instead of out of pocket. Current figures are on Reverse Mortgage Costs, and the yearly cost over time is on your TALC disclosure.

The protections built into a HECM

This is where the HECM earns its keep:

• Independent counseling before you apply, so you hear it from someone who isn't selling anything.
• The financial assessment, so you don't take a loan you can't keep up with.
• Non-recourse. If the home sells for less than the balance, you and your heirs don't pay the difference.
• A line of credit that can't be frozen or reduced by the lender while you meet the terms.
• Eligible non-borrowing spouse protection, so a younger spouse can generally stay.
• Heirs' options, including selling for the lesser of the balance or 95 percent of appraised value. See Reverse Mortgages and Heirs.
• HUD backs your advances. If a lender ever couldn't pay you, HUD could step in. See Why Reverse Mortgages Have 2 Notes and 2 Deeds of Trust.
• Limits on the rate. Adjustable HECMs have caps on how far the rate can move.
• No required add-ons. HUD rules bar requiring you to buy other financial products to get a HECM.

The HECM family

The HECM comes in a few versions. Same core rules, different jobs.

Adjustable-rate HECM

The flexible one. Line of credit, monthly payouts, a mix, and a line that grows. This is what most of my clients choose once they see the options side by side. See Comparing Fixed and Adjustable Reverse Mortgages.

Fixed-rate HECM

One rate for life, one lump sum at closing, and no line of credit. Best when you need nearly all of it now, like paying off a big mortgage. See Fixed-Rate Reverse Mortgages.

HECM for Purchase

Buy your next home with a down payment and a HECM in one closing, with no required monthly mortgage payments afterward. You must continue to pay property taxes and homeowners insurance, maintain the home, and meet the other loan terms. We generally close these in 30 days or less, but we always follow the contract. See HECM for Purchase.

HECM refinance

Already have a HECM? If your home has gained value or the HECM limit has gone up, a HECM to HECM refinance may give you access to more money. HUD requires the new loan to give you a real benefit, and you may get a credit for mortgage insurance you've already paid. See Reverse Mortgage Refinance.

HECM vs. proprietary (jumbo) reverse mortgages

A proprietary reverse mortgage is a private loan with its own rules. It isn't insured by FHA. Here's how they generally differ:

• Loan size: jumbo programs use their own maximums, above the HECM limit.
• Mortgage insurance: jumbo programs aren't FHA-insured, so they don't charge FHA mortgage insurance.
• Rates: jumbo rates are usually higher.
• Payout choices: jumbo programs usually offer fewer. In Washington, proprietary programs don't offer a line of credit.
• Ages: some jumbo programs accept borrowers younger than 62 in some states. In Texas, HomeSafe Standard requires borrowers to be 62, and the Texas Constitution requires the borrower or the borrower's spouse to be at least 62. In Washington, HomeSafe Standard is available starting at age 60.
• Condos: some jumbo programs accept condos that aren't FHA-approved.
• Protections: each program sets its own terms. They don't follow HECM rules unless the documents say so.

The jumbo programs we compare include Mutual of Omaha Secure Equity, Finance of America HomeSafe, Longbridge Platinum, Smartfi Choice, Nationwide Equities EquityPower, and MCM Holdings MCM Edge. HomeSafe Standard is available in all nine states where we're licensed. On many homes, I run a HECM and a jumbo side by side, and the right answer isn't always the one you'd guess. See Proprietary (Jumbo) Reverse Mortgages.

Where people get tripped up

• Assuming the HECM is a government handout. It's a loan, with real costs. It's insured by FHA, which is what makes the protections possible.
• Thinking a high-value home doesn't qualify. It does. The limit just caps the value used.
• Choosing fixed by reflex. It can leave money on the table.
• Forgetting the spouse. A younger spouse changes the math and needs a plan.
• Waiting until there's a crisis. A HECM set up early, with a line of credit you barely touch, often does more good than one taken out in a hurry.

How to get started

1. Get your estimate. Get My Estimate shows a HECM next to jumbo options.
2. Talk it through. Call us at 530-888-6000 or book a call. Bring your family if you'd like.
3. Do counseling. We'll give you the list of HUD-approved agencies.
4. Apply. Start My Reverse Mortgage Review.
5. Appraisal, underwriting, closing. We'll keep you posted at every step.

Common questions

What does HECM stand for?

Home Equity Conversion Mortgage. It's the reverse mortgage insured by FHA.

Is a HECM the same as a reverse mortgage?

A HECM is one kind of reverse mortgage, and by far the most common. Proprietary (jumbo) reverse mortgages are the other main kind.

How much can I get with a HECM?

It depends on the youngest borrower's or eligible non-borrowing spouse's age, the expected rate, and your home's value up to the HECM limit. Get your estimate.

Do I have to make monthly payments?

No. There are no required monthly mortgage payments. You must continue to pay property taxes and homeowners insurance, maintain the home, and meet the other loan terms. You can make voluntary payments if you want.

Can my heirs keep the house?

Yes, by paying off the loan, usually with a new mortgage or other money. If the balance is more than the home is worth, they generally don't have to pay more than 95 percent of the appraised value. See Reverse Mortgages and Heirs.

Is a HECM better than a jumbo reverse mortgage?

Sometimes. A HECM usually wins on flexibility and protections. A jumbo often wins on loan size for high-value homes. I'll run both.

Can I get a HECM on a condo?

Yes, if the project is FHA-approved or the unit gets single-unit approval. If not, a proprietary program may work.

What happens if I move into assisted living?

If you're away more than 12 consecutive months for health reasons and no other borrower lives in the home, the loan can come due. An eligible non-borrowing spouse can generally stay.

Next step

If you're 62 or older and want to see what a HECM could do, get your estimate or call us at 530-888-6000. I'd rather you understand every piece of it before you decide anything.

Sources

• 24 CFR Part 206, Home Equity Conversion Mortgage Insurance: ecfr.gov
• HUD, FHA Reverse Mortgage for Seniors (HECM): hud.gov
• HUD Mortgagee Letter 2021-11: hud.gov
• HUD Mortgagee Letter 2023-23: hud.gov
• "HECM Math," National Reverse Mortgage Lenders Association, 2024: nrmlaonline.org
• Consumer Financial Protection Bureau, reverse mortgages: consumerfinance.gov