Reverse Mortgage (HECM)

A reverse mortgage, formally a Home Equity Conversion Mortgage or HECM, lets homeowners 62 and older convert home equity into cash while continuing to own and live in the home, with no required monthly mortgage payment. Instead of you paying the balance down, interest accrues and the loan is repaid when you sell, move out permanently, or pass away. HECMs are insured by the FHA and carry consumer safeguards that older “reverse mortgage” products lacked.

How it works

With a traditional mortgage, you pay the lender every month and your equity grows. A HECM runs in reverse: the lender advances money to you, no monthly principal-and-interest payment is required, and the balance grows over time as interest and mortgage insurance accrue. You keep title. The loan comes due when the last borrower (or eligible non-borrowing spouse) permanently leaves the home.

How much you can borrow depends on three inputs: the youngest borrower’s age (older = more), current interest rates (lower = more), and your home’s value, counted up to the FHA lending limit of $1,249,125 as of 2026, a figure that adjusts annually. Any existing mortgage must be paid off first out of the proceeds, which is itself a common use: eliminating a required monthly payment in retirement.

You can take the money as:

A line of credit, the most popular choice; the unused portion actually grows over time
Monthly payments, for life in the home (“tenure”) or for a set period (“term”)
A lump sum, available with a fixed rate, though FHA caps first-year draws
A combination of the above

The part almost nobody knows: you can BUY a home with one

A reverse mortgage isn’t only for the house you already own. The HECM for Purchase program lets buyers 62 and older use a reverse mortgage to buy their next primary residence, in one transaction with one set of closing costs. Here’s the shape of it:

You bring a large down payment from savings or the sale of your current home. As a rough rule it lands near half the purchase price; your exact figure depends on the youngest buyer’s age and current rates (older = less down).
The HECM covers the rest, and you make no monthly mortgage payments on it for as long as you live there and keep up taxes, insurance, and maintenance.
The same FHA safeguards apply: mandatory counseling, the non-recourse guarantee, and spousal protections.

Where this shines in practice: selling the two-story family house, buying the single-level condo near the grandkids, and keeping a meaningful chunk of the sale proceeds in the bank instead of sinking every dollar into the new home, all without adding a payment to a fixed retirement income. If you’re weighing downsizing against staying put, ask us to run the purchase math alongside the refinance math; it’s the comparison most lenders never offer.

The consumer safeguards, up front

Because this product serves older homeowners and is easy to misunderstand, the protections matter as much as the mechanics:

Mandatory independent counseling. Every HECM borrower must complete a session with a HUD-approved counselor (not affiliated with any lender) and receive a certificate before an application can proceed.
Non-recourse guarantee. You (and your heirs) can never owe more than the home is worth when the loan is repaid. If the balance outgrows the value, FHA insurance absorbs the difference, never your family.
Heirs keep the upside. When the loan ends, heirs may sell and keep any remaining equity, keep the house by paying the balance (capped at 95% of appraised value), or walk away with no liability.
Financial assessment and set-asides. Lenders must verify you can sustain taxes, insurance, and upkeep, and can reserve proceeds to pay them if the assessment is tight.
Spousal protections. An eligible non-borrowing spouse can generally remain in the home after the borrowing spouse passes, under FHA rules.
First-year draw limits. FHA restricts how much of the total can be taken in year one, discouraging the drain-it-all-at-once mistakes of earlier eras.

Who qualifies

Age 62+: the youngest borrower on title must be at least 62
Primary residence: you live in the home most of the year; second homes and rentals are ineligible
Substantial equity: typically at least roughly 50%, since existing liens must be paid off from proceeds
Eligible property: single-family homes, FHA-approved condos, 2–4 unit homes where you occupy one unit, and qualifying manufactured homes
Financial capacity: demonstrated ability to keep paying taxes, insurance, and maintenance
Completed HUD counseling: certificate in hand before application

What it costs

Honesty requires saying it plainly: HECMs are among the more expensive mortgages to open.

FHA mortgage insurance: 2% of the home’s value (up to the limit) up front, plus 0.5% annually on the balance. This is what funds the non-recourse guarantee
Origination fee: federally capped, up to $6,000 depending on home value
Standard closing costs: appraisal, title, counseling fee (typically $125–$200)
Accruing interest: the balance compounds over time, which means equity erodes faster the longer the loan runs

Most costs can be financed into the loan, so little is due out of pocket, but financed costs accrue interest too.

Pros and cons

Pros

Eliminates required monthly mortgage payments for life in the home (taxes and insurance continue)
Non-recourse: your family’s other assets are never at risk
The line-of-credit option grows over time and can serve as a retirement reserve
Proceeds are loan advances, not taxable income, and don’t affect Social Security or Medicare

Cons

High upfront costs relative to other equity tools
A compounding balance steadily reduces the estate you leave
Taxes, insurance, and upkeep lapses can trigger default, the leading real-world failure mode
Need-based benefits (Medicaid, SSI) can be affected if proceeds accumulate in your accounts
Complexity: this product rewards slow decisions and family conversations

Reverse mortgage vs. the nearest alternatives

HELOC: far cheaper to open and sensible if you can comfortably make monthly payments. But it requires payments, can be frozen, and has an end date. A HECM credit line cannot be reduced or frozen as long as you meet your obligations.
Cash-out refinance: delivers a lump sum at lower cost, but replaces one required monthly payment with another, often the wrong direction for a fixed retirement income.
Downsizing: selling and buying a smaller home converts equity to cash with no loan at all. It’s always worth an honest comparison, and a HECM-for-Purchase can even combine the two.

How to get started with Priority Home Mortgage

A reverse mortgage is the right tool for some retirements and the wrong one for others, and our first job is to help you figure out which you are, ideally with your family or adviser in the conversation. Priority Home Mortgage will walk you through real numbers for your age and home value, point you to HUD-approved counseling, and never rush the decision. Start with a quick quote or have an adult child reach out on your behalf; we’re glad to talk to the whole family.

Reverse Mortgage (HECM): your questions, answered

Can I buy a home with a reverse mortgage?

Yes. Most people have never heard of it, but the HECM for Purchase program lets buyers 62 and older purchase a new primary residence with a reverse mortgage in a single transaction. You bring a substantial down payment (very roughly half the price, depending on your age and current rates), the HECM finances the rest, and you make no monthly mortgage payments afterward as long as you live in the home and keep up taxes, insurance, and upkeep. It's a powerful way to rightsize into a ranch, move closer to family, or free up cash without taking on a payment in retirement.

Does the bank take my house with a reverse mortgage?

No. You remain the owner and stay on title. The lender holds a lien, just like any mortgage. The loan comes due when the last borrower permanently leaves the home, sells, or passes away, or if property taxes, insurance, or basic upkeep lapse. As long as you meet those obligations, you can live there for life.

What happens to my heirs when I pass away?

Heirs typically get a window (commonly six months, with possible extensions) to choose: sell the home and keep any equity above the loan balance, keep the home by paying off the balance (capped at 95% of appraised value if the balance exceeds it), or walk away by signing a deed in lieu. Because a HECM is non-recourse, no other family assets are ever at risk.

How much money can I get from a reverse mortgage?

It depends on the youngest borrower's age, current interest rates, and your home's value up to the FHA limit of $1,249,125 as of 2026. Older borrowers with more equity qualify for more. Any existing mortgage is paid off first from the proceeds. FHA also limits how much you can draw in the first year as a consumer safeguard.

Do I still pay property taxes and homeowners insurance?

Yes, that's the core ongoing obligation. Falling behind on taxes, insurance, or basic home maintenance can put the loan in default, and this is the most common way reverse mortgages get into trouble. Lenders assess your finances at application and can set aside part of the proceeds specifically to cover these costs if needed.

Is reverse mortgage counseling really required?

Yes, for every HECM, with no exceptions. You must complete a session with an independent HUD-approved counselor (by phone or in person, typically around $125–$200) and receive a certificate before a lender can process your application. It exists to make sure you understand the costs, obligations, and alternatives before committing. We consider it a feature, not a hurdle.

Will a reverse mortgage affect my Social Security or Medicare?

Reverse mortgage proceeds are loan advances, not income, so they don't affect Social Security or Medicare. Need-based programs like Medicaid or SSI are different: proceeds sitting in your bank account past month-end can count against asset limits. If you rely on those programs, structure your draws carefully and talk with a benefits advisor first.