A Guide for Homeowners 62 and Better

Your Home Has Helped Fund Your Life. Now It Can Help Fund Your Retirement.

For most homeowners 62 and older, the house is the single largest source of savings they have. A Home Equity Conversion Mortgage (HECM), commonly called a reverse mortgage, lets you convert a portion of that equity into cash, a line of credit, or monthly advances, without taking on a required monthly mortgage payment. This page walks through how it actually works, in plain English, so you and your family can have an informed conversation before deciding anything.

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62+ Homeowner's Reverse Mortgage Guide

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The Basics

What a HECM Loan Is and How It Works.

1. Access to Home Equity as Cash

A HECM lets you access a percentage of your home equity as a single lump sum, fixed monthly advances for a set number of months or for life, a line of credit, or a combination, without a required monthly mortgage payment. You must still live in the home and pay property taxes and insurance. Proceeds are generally not subject to income tax and can be used for any purpose.

2. Repayment Flexibility

A HECM is not free money, interest and fees accrue on the balance, but you can pay as much or as little toward it each month as you like, including nothing. Most borrowers choose not to make a monthly payment. Where a traditional mortgage moves money from you to the lender every month, a HECM typically moves the other way: the lender advances funds to you.

3. Never Owe More Than the Home Is Worth

When the loan becomes due and is satisfied by selling the home, the FHA guarantees that neither you nor your heirs will ever be personally liable for a balance that exceeds what the home sells for. This is the loan's non-recourse feature, and it applies to every HECM.

Common Uses

What Homeowners Actually Do With the Proceeds.

✓Refinance an existing mortgage — turning a required monthly payment into an optional one, often the single biggest cash-flow change available to a retiree on a fixed income.
✓Buy a new primary residence — through the HECM for Purchase (H4P) program, combining home-sale proceeds with H4P financing to buy a better-suited home with no required monthly payment. See our H4P page for details.
✓Establish a rainy-day fund — a HECM line of credit is a way to create a standby emergency fund; unused funds in the line don't accrue interest or fees.
✓Fund long-term care — paying long-term care insurance premiums, or self-funding care, with a HECM line of credit rather than going without coverage.
✓Support retirement cash flow — drawing from a HECM line of credit during a market downturn instead of selling investments at a loss, giving a portfolio time to recover.
✓Pay for home improvements — ramps, walk-in tubs, or other updates that let you safely age in place.

Eligibility

What It Takes to Qualify.

Age: the borrower (or youngest co-borrower) must be 62 or older.
Home ownership: the home must be your principal residence, generally owned free and clear or with significant equity, roughly 50 percent or more. A shortfall can often be covered by bringing funds to closing.
Credit: there is no minimum credit score requirement, though the lender reviews credit history, property-charge history, and monthly residual income to confirm you can keep up with taxes and insurance.

Counseling: a required session with an independent, HUD-approved counselor, in person or by phone, to confirm the loan fits your situation before you apply.
Property types: single-family homes, two-to-four unit properties where you occupy one unit, FHA-approved condos, modular homes, and manufactured homes meeting FHA requirements all generally qualify.

What Happens Later

The Loan Is Due and Payable. Now What?

A maturity event, most often the death of the last surviving borrower, a permanent move out, or the sale of the property, triggers the loan to become due and payable. Here is what happens next, in plain terms:

If heirs don't want to keep the home

They can sell it on the open market and keep any profit above the loan balance (with up to six months, sometimes extended by HUD, to do so), or sign a deed-in-lieu of foreclosure and hand the home to the lender without owing the difference and without it affecting their credit.

If heirs want to keep the home

They can pay off or refinance the balance if it's less than the home's value, or pay the lesser of the full loan balance or 95 percent of the home's appraised value, often by taking out a new mortgage on the home.

A non-borrowing spouse who still lives in the home after the last borrower dies may, under HUD rules, be able to remain and defer repayment during what's called the deferral period, as long as they keep paying property taxes and insurance.

Myths vs. Facts

Setting the Record Straight.

Myth: "My family loses the home when I pass away."

Fact: When you permanently move out, whether by selling or passing away, neither you, your estate, nor your heirs are responsible for any deficit if the balance exceeds the home's value. If your heirs want to keep the home, they can pay the lesser of the loan balance or 95 percent of its appraised value.

Myth: "I'm giving up the deed to my own home."

Fact: The deed stays in your name. As long as you pay your property taxes, insurance, and maintain the home, you cannot be foreclosed on for the term of the loan, and you remain free to move or sell whenever you choose.

Myth: "The safest thing is to own my home free and clear and never touch it."

Fact: In the event of an extended nursing home stay or an unexpected expense, you could end up needing equity you otherwise can't easily reach. A HECM can unlock that equity for your benefit while you're still able to use it.

Myth: "HECMs are too expensive to make sense."

Fact: Upfront costs can be higher than a traditional mortgage, and almost all of them, including closing costs and ongoing fees, can be rolled into the loan. In exchange you get no required monthly payment, a growing line-of-credit option, and the FHA-insured non-recourse guarantee.

FAQ

Common Questions.

Will I still own my home with a reverse mortgage?+

Yes. The deed stays in your name and you remain on title. You can move, sell, or refinance whenever you choose, exactly as with any mortgage, as long as you keep up with your property taxes, homeowners insurance, and maintenance.

Can my children end up owing money on my reverse mortgage?+

No. A HECM is a non-recourse loan, which the FHA guarantees. If the loan balance ends up higher than the home is worth when it's sold, neither you nor your heirs are ever personally responsible for the difference.

Will I have to make a monthly mortgage payment?+

No monthly principal and interest payment is required for as long as you live in the home as your primary residence, maintain it, and pay the property-related taxes, insurance, and any HOA dues. Most borrowers choose to make no monthly payment at all.

What happens when the loan becomes due?+

The loan becomes due and payable when the last surviving borrower permanently leaves the home, most commonly by passing away or moving out. It is typically satisfied by selling the home. If the sale proceeds exceed the balance, you or your heirs keep the difference. If they don't, the FHA's insurance covers the shortfall, not you or your family.

Is this guide a substitute for the required counseling session?+

No. Every HECM borrower must complete an independent counseling session with a HUD-approved counselor before applying, to confirm the loan is understood and is a good fit. This page and the downloadable guide are educational and do not replace that session.

Is a HECM only for homeowners who are struggling financially?+

No, that's one of the more persistent myths. Increasingly, financial advisors view a HECM line of credit as a proactive retirement-planning tool, not a last resort. Used earlier in retirement, it can create cash flow flexibility and help a portfolio last longer, not just rescue a household that has run out of options.

Should family members be included in the decision?+

That is a personal choice, but many homeowners benefit from involving trusted family members, a financial advisor, or an attorney before deciding, since the loan affects what happens to the home down the road.