What Is a HECM? The FHA-Insured Reverse Mortgage, Explained

What is a HECM? A HECM is a Home Equity Conversion Mortgage, the reverse mortgage insured by the Federal Housing Administration for homeowners 62 and older. It converts part of your home equity into cash, a monthly payment, or a line of credit, it requires no monthly mortgage payment as long as you meet the borrower obligations, and it is repaid when the last borrower sells, moves out permanently, or dies. It is the only reverse mortgage that carries federal insurance, and it accounts for the large majority of reverse mortgages written in the United States.

Almost every person who calls me has already read the phrase somewhere and could not tell me what the letters stand for. That is not a failure on their part. The industry uses HECM as shorthand constantly and rarely stops to define it. So this page defines it, then goes through what it actually does, what it costs, and where it stops being the right answer.

This material is not from HUD or FHA and was not approved by HUD or a government agency. A reverse mortgage is a loan that must be repaid, not a government benefit. Program rules and figures are set by HUD and FHA, are current as of August 2026, and can change.

What Is a HECM in One Paragraph?

A HECM is a mortgage that runs in the other direction. On a traditional loan you send the lender money every month and your balance falls. On a HECM the lender sends you money, or holds it available for you, and the balance rises as interest and insurance premiums accrue. You keep the title to and ownership of your home the entire time. Nothing has to be repaid until a maturity event occurs, which in practice means the last borrower dies, sells the home, or stops living there as a primary residence.

The insurance is the part that makes a HECM different from every other way of pulling equity out of a house. Because FHA insures the loan, two promises come attached: your available funds stay available even if the lender fails, and the loan is non-recourse, meaning you or your heirs will never owe more than the home is worth at the time the loan is repaid. The HUD program overview is the primary source on both points.

What Is a HECM Compared With Other Reverse Mortgages?

There are three broad kinds of reverse mortgage, and only one of them is a HECM. Knowing which is which saves a lot of confusion when you start comparing offers.

When someone says reverse mortgage without qualifying it, they almost always mean a HECM. When a proprietary product is the better answer, it is usually for one of three specific reasons: the home is worth more than a HECM will count, the borrower is between 55 and 61, or the property is a condominium the FHA has not approved. I price both side by side when either applies, and the condo without FHA approval guide covers the third case in detail.

What Is a HECM Borrower Required to Qualify?

HECM eligibility is narrower than most loans in some ways and far wider in others. There is no minimum credit score and no income threshold to clear. What there is instead:

• Age. Every borrower on the loan must be 62 or older. A younger spouse can be protected as an eligible non-borrowing spouse, but cannot be a borrower.
• Primary residence. The home has to be where you actually live, not a second home or a rental.
• Equity. There is no fixed percentage, but the HECM has to pay off any existing mortgage at closing before a dollar reaches you. In practice that usually means owning the home outright or being well along on the current loan.
• Eligible property. A single-family home, a two-to-four unit where you occupy one unit, an FHA-approved condominium, or a manufactured home meeting FHA standards.
• Financial assessment. The lender reviews your history of paying property taxes and insurance and whether your income covers ongoing obligations. A concern here does not end the file. It usually results in a life expectancy set-aside, which reserves part of your proceeds to cover future taxes and insurance.
• Counseling. An independent session with a HUD-approved counselor, completed before the lender can charge you an appraisal or origination fee.

The full eligibility picture lives on the reverse mortgage requirements page, and the honest list of hard stops is on what disqualifies you from a reverse mortgage.

How a HECM Actually Pays You

This is where a HECM stops being an abstraction. The loan calculates a principal limit, which is the total it can support based on the youngest borrower's age, the home value up to the FHA lending limit, and the expected interest rate. Older borrower, higher value, lower rate all push that number up. How you receive it is your choice among the payout options HUD allows:

1. Line of credit. Funds sit available and the unused portion grows over time at the loan's rate. This is the option financial planners talk about most, and the one most of my clients end up in.
2. Tenure. Equal monthly payments for as long as you live in the home as your primary residence.
3. Term. Equal monthly payments for a fixed number of years you select, which produces larger payments than tenure over a shorter window.
4. Modified tenure or modified term. A monthly payment combined with a smaller line of credit. Most of the people I work with who want both stability and a reserve land here.
5. Single lump sum. One disbursement at closing. This is the only option that uses a fixed interest rate, and it comes with the year-one draw limit described below.

One constraint applies across all of them. HUD generally limits what you can access in the first twelve months to 60 percent of the principal limit. If mandatory obligations run higher, most often an existing mortgage the HECM has to retire, you may draw what those require plus an additional 10 percent of the principal limit. Drawing above 60 percent in year one raises your upfront insurance premium, so it is a priced decision rather than a free one. The reverse mortgage calculator will get you close on the numbers, and how does a reverse mortgage work walks the mechanics end to end.

What Is a HECM Going to Cost You?

Honest answer: a HECM is not a cheap loan, and anyone who tells you otherwise is selling. The costs break into four buckets, and most of them can be financed into the loan rather than paid out of pocket, which is a convenience rather than a discount.

• Upfront mortgage insurance premium. 2 percent of the maximum claim amount, charged at closing. This is what buys the non-recourse protection and the guarantee that your funds stay available.
• Annual mortgage insurance premium. 0.5 percent of the outstanding loan balance per year, accruing rather than billed.
• Origination fee. Capped by HUD at the greater of $2,500 or 2 percent of the first $200,000 of home value plus 1 percent of the value above that, to a maximum of $6,000.
• Third-party closing costs. Appraisal, title, recording, and the counseling session, which is often around $125 to $200 and can sometimes be waived for lower-income households.

Interest accrues on what you have actually drawn, not on the full principal limit. That is the single most important cost fact on this page and the reason the line of credit option is usually more efficient than a lump sum. Money you leave undrawn costs you nothing in interest, and on a HECM line of credit the undrawn portion is growing at the same time. Rate structures vary and I do not quote specific rates on this site; the disadvantages page puts the cost question in context without softening it.

What a HECM Protects, and What It Does Not

The FHA insurance behind a HECM buys three concrete protections. The loan is non-recourse, so you or your heirs will never owe more than the home is worth at the time the loan is repaid, and FHA insurance absorbs any shortfall. Your line of credit stays available regardless of what happens to your lender or to home values. And your heirs can keep the home by repaying the lesser of the full balance or 95 percent of the appraised value, a protection the Consumer Financial Protection Bureau describes plainly.

What the insurance does not do matters just as much. It does not remove your obligations. You remain responsible for paying property taxes, homeowners insurance, and any HOA dues; for maintaining the home; and for occupying it as your primary residence. Failure to meet these obligations may cause the loan to become due and payable. I would rather you read that as a yearly to-do list than as fine print, because unpaid property charges and unreturned occupancy certifications are the two realistic ways a healthy HECM goes wrong. The reverse mortgage rules page walks each obligation in order.

When a HECM Is Not the Right Answer

I turn down more of these conversations than people expect, and it is usually for one of these reasons.

You plan to move within a few years. The upfront costs are front-loaded, so a short horizon rarely earns them back. You are trying to solve a temporary cash gap that a smaller, cheaper solution would cover. Your home value sits well above the 2026 FHA lending limit of $1,249,125, in which case a proprietary or reverse second mortgage may reach more of your equity. You are carrying a first mortgage at 2 or 3 percent that a HECM would have to pay off, which is often a bad trade in a higher-rate market. Or your budget is already strained by taxes, insurance, and upkeep, in which case adding a loan that requires those payments to continue makes the pressure worse rather than better.

Before you decide anything, read the downside of a reverse mortgage and, if the marketing has left you uneasy, is a reverse mortgage a scam. I would rather you arrive at a no with clear eyes than a yes you are unsure of.

What Is a HECM Worth in Bend and Central Oregon?

The HECM program is federal, so the rules do not change at the Oregon border. What changes here is how often the conversation comes up and which constraints bind first.

About 21.8 percent of Deschutes County residents are 65 or older according to U.S. Census Bureau QuickFacts, meaningfully above the national share, and many of those households bought long before the last decade of appreciation. That combination, long tenure plus a large equity gain, is exactly the profile a HECM was designed around.

Two local notes. Bend home values push against the $1,249,125 maximum claim amount more often than in most markets, per HUD's 2026 lending limit announcement, which makes the HECM versus proprietary comparison a live question here rather than an academic one. And homeowners insurance is the obligation to watch across Central Oregon, because wildfire exposure has made renewals less predictable and a lapsed policy is a default whether the cause was an unpaid bill or a carrier nonrenewal.

I work with homeowners across Bend, Redmond, Sunriver, Sisters, La Pine, Prineville, and Madras from my office at 601 NW Harmon Blvd. The Bend reverse mortgage guide covers local equity, reverse mortgage in Oregon covers the statewide picture, reverse mortgage counseling covers the required session, and the full product lineup sits on the reverse mortgage programs page. If you are weighing this against a home equity line, reverse mortgage vs HELOC runs the comparison, and if adult children are helping with the decision, send them the guide for adult children.

What Is a HECM: Frequently Asked Questions