HECM reverse mortgage basics for homeowners 62+

A Home Equity Conversion Mortgage is an FHA-insured loan for homeowners 62 and older that converts equity into cash without a required monthly mortgage payment. You can take proceeds as a lump sum, monthly payments, a growing line of credit, or a combination.

The loan becomes due when the last borrower permanently leaves the home. Interest accrues on what you have drawn, so the balance grows over time rather than shrinking.

The unused portion of a HECM line of credit grows over time at the loan's rate — independent of what the home is worth. For planning-minded homeowners, opening a line early and leaving it untouched creates a standby resource that gets larger the longer it sits unused.

Property taxes, homeowners insurance, any HOA dues, and keeping the home in reasonable repair. It must remain your primary residence. Failing on these can put the loan in default, which is the main way reverse mortgages go wrong.

HECMs are non-recourse. If the balance ends up higher than the home's value, FHA insurance covers the difference and your heirs are never personally liable. If there is equity left, it belongs to your estate. Heirs can repay the loan and keep the home, or sell it and keep what remains.

If you plan to move within a few years, the upfront costs will not have time to justify themselves. If a family member lives with you who is not on the loan, they may have to leave when it comes due. If the shortfall is small and temporary, a HELOC or downsizing may serve you better. HUD-approved counseling is required, and that is a good thing.