A Reverse Mortgage, formally known as a Home Equity Conversion Mortgage (HECM), is a special type of FHA-insured loan designed for homeowners who are 62 years or older. Instead of making monthly mortgage payments to a lender, the lender makes payments to the homeowner—unlocking equity that’s tied up in the home.
The homeowner remains on title and keeps ownership of the property. The loan is repaid when the borrower sells the home, moves out permanently, or passes away.
How It Works
- The borrower must live in the home as their primary residence.
- No monthly mortgage payments are required (though property taxes, insurance, and maintenance must still be paid).
- Borrowers can choose how they receive the funds:
- Lump sum
- Monthly payments
- Line of credit (that can grow over time)
- Or a combination
Benefits of a Reverse Mortgage / HECM
- Supplement Retirement Income
Provides tax-free cash (per IRS treatment of loan proceeds) that can help cover daily living expenses, medical costs, or lifestyle needs. - No Monthly Mortgage Payments
Reduces financial strain since you’re not required to make a monthly mortgage payment (as long as taxes, insurance, and upkeep are maintained). - Flexibility in Accessing Funds
Choose a lump sum, monthly income stream, line of credit, or a mix—tailored to your financial goals. - Line of Credit Growth Feature
If you select the line of credit option, the available funds actually grow over time, giving you more access to money in the future. - Stay in Your Home
Allows seniors to age in place without being forced to sell or downsize to access home equity. - Non-Recourse Loan
You or your heirs will never owe more than the home’s value at the time of repayment, even if the loan balance ends up exceeding the property’s worth. - Heirs Have Options
When the loan becomes due, heirs can either sell the home, pay off the loan (typically by refinancing), or let the lender take the property—whichever makes the most sense for them.
In short: A reverse mortgage (HECM) can be a powerful tool for homeowners 62+ to unlock home equity, eliminate monthly mortgage payments, and create additional retirement security—all while staying in their home.