If you’re a homeowner aged 62 or older searching for “Home Equity Conversion Mortgage” or “HECM,” this guide is your comprehensive resource.  The Home Equity Conversion Mortgage (HECM) is a powerful FHA-insured reverse mortgage program that allows you to convert your home equity into tax-free cash without making monthly payments, selling your home, or relocating. Regulated by HUD, it’s the most popular reverse mortgage in the U.S., offering protections for you and your heirs.

In this updated 2025 guide, we cover the definition of HECM, how it works, eligibility requirements (including new residency rules), costs, comparisons to HELOCs and proprietary options, common myths, scams to avoid, and FAQs. With the maximum claim amount rising to $1,209,750 (per HUD Mortgagee Letter 2024-22), HECM is more accessible for retirement planning amid inflation.

Key Takeaways:

  • HECM is an FHA-insured reverse mortgage exclusively for homeowners 62+.
  • No required monthly payments; repay only upon selling, moving, or passing away.
  • 2025 maximum claim amount: $1,209,750 (increased from $1,149,825 in 2024, source: HUD ML 2024-22).
  • Tax-free funds via lump sum, line of credit, monthly payments, or a combination.
  • Non-recourse loan: Never owe more than your home’s value, protected by FHA.
  • New eligibility rule: Non-permanent residents ineligible after May 25, 2025 (source: HUD ML 2025-09).

Illustration explaining how a Home Equity Conversion Mortgage (HECM) works in 2025, including payout options and eligibility.

What Is a Home Equity Conversion Mortgage (HECM)?

A Home Equity Conversion Mortgage (HECM), often simply called a HECM reverse mortgage, is a federally insured reverse mortgage program administered by the FHA and HUD.

It’s designed exclusively for homeowners aged 62 and older, enabling them to borrow against their home’s equity without the burden of monthly repayments.  Unlike traditional forward mortgages, where you pay the lender, a HECM reverses the flow—the lender pays you, providing tax-free proceeds while you retain full ownership and title to your home.

The HECM is the most trusted and widely used reverse mortgage option, accounting for over 90% of all reverse mortgages originated in the U.S.  In 2025, with higher loan limits and stable interest rates, it’s an increasingly attractive choice for retirees facing rising living costs.

The loan balance grows over time due to interest and fees, but repayment is deferred until the last borrower sells the home, permanently moves out, or passes away.  Thanks to FHA insurance, the loan is non-recourse, meaning neither you nor your heirs can owe more than the home’s appraised value at repayment—even if property values decline.

How a HECM Reverse Mortgage Works in 2025

Traditional mortgages require monthly payments to build equity and pay down the loan.  A HECM reverse mortgage flips this model: You receive payments from the lender, and no monthly mortgage payments are required as long as you live in the home as your primary residence, maintain the property, and stay current on property taxes, homeowners insurance, and HOA fees (if applicable).

The amount you can borrow—known as the principal limit—depends on factors like your age (or the youngest borrower’s age), current interest rates, your home’s appraised value, and the 2025 maximum claim amount (MCA) of $1,209,750.

For example, a 70-year-old homeowner with a $600,000 home might access up to 55% of the equity (around $330,000), adjusted for rates and fees (based on HUD guidelines).

You choose how to receive the funds:

  • Lump Sum: Receive all proceeds at once with a fixed interest rate—ideal for paying off an existing mortgage or large expenses.
  • Line of Credit: Access funds as needed; unused portions grow over time at a rate tied to the monthly or annual treasury index, increasing available credit over time.
  • Monthly Payments: Steady income for life (tenure option) or a fixed term—great for supplementing Social Security.
  • Combination: Mix options for maximum flexibility.

You continue to own and live in your home indefinitely.  When the loan becomes due (e.g., upon death or sale of the property), it’s typically repaid through the sale of the home.  If the balance exceeds the sale price, FHA insurance covers the difference—no debt passes to heirs.

In 2025, HECM’s line of credit growth remains a standout feature, offering inflation-hedging potential amid economic uncertainty.

With the HECM line of credit option, your available funds can grow over time—giving you access to even more money the longer you leave it untouched.

2025 HECM Loan Requirements and Eligibility

To qualify for a HECM in 2025, you must meet these HUD-mandated criteria:

  1. Be 62 years or older (or have a spouse who is, with protections for non-borrowing spouses).
  2. Occupy the home as your primary residence (no minimum occupancy time required).
  3. Own the home outright or have a low enough mortgage balance to pay it off with HECM proceeds.
  4. Complete a mandatory HUD-approved counseling session to explore alternatives and understand risks.
  5. Pass a financial assessment demonstrating the ability to cover ongoing property charges (taxes, insurance, maintenance).
  6. Have no delinquent federal debts (e.g., student loans or taxes).
  7. Be a U.S. citizen, permanent resident, or eligible non-citizen (non-permanent residents excluded for case numbers after May 25, 2025, per HUD updates).

Eligible property types include:

  • Single-family homes (1-4 units, if you occupy one).
  • FHA-approved condominiums.
  • Certain manufactured homes meet HUD standards.
  • Properties with accessory dwelling units (ADUs) are now explicitly allowed.
2024 vs. 2025 HECM Changes20242025
Maximum Claim Amount$1,149,825$1,209,750 (+5%)
Residency RulesAllowed non-permanentExcluded after May 25

Compared to 2024, the 2025 MCA increase to $1,209,750 applies nationwide, including high-cost areas like Hawaii and Alaska, potentially unlocking more funds for borrowers with higher-value homes.

HECM Costs and Fees in 2025

HECM involves upfront and ongoing costs, but most can be financed into the loan, minimizing out-of-pocket expenses.  These fees support the FHA insurance that protects you and the program’s sustainability.

  • Upfront FHA Mortgage Insurance Premium (MIP): 2% of the MCA (e.g., $24,195 on the $1,209,750 max).
  • Annual MIP: 0.5% of the outstanding loan balance.
  • Closing Costs: Include origination fees (capped at $6,000), appraisal ($500-$1,000), title search, and other standard charges—typically 1-2% of the loan amount.
  • Servicing Fees: Up to $35/month, if applicable.

All costs are disclosed in the Total Annual Loan Cost (TALC) disclosure.  In 2025, with no major fee changes but higher limits, borrowers may see scaled costs, but the non-recourse protection ensures long-term value.

HECMs are non-recourse loans, which means neither you nor your heirs can ever owe more than the home is worth—even if housing values decline.

Why FHA Insurance Matters for the HECM

FHA insurance sets HECM apart from proprietary reverse mortgages or home equity loans.  It guarantees:

  • Your payments continue, even if the lender faces issues.
  • Non-recourse protection: No personal liability beyond the home’s value.
  • Flexible repayment: Prepay anytime without penalty.
  • Program stability amid 2025 economic shifts.

This insurance, funded by MIP fees, provides peace of mind—making HECM the safest reverse mortgage option, as emphasized by the Consumer Financial Protection Bureau (CFPB).

FHA insurance is what makes the HECM safer than other loan types.  It guarantees your funds—even if the lender goes out of business.

Here’s a side-by-side look at HECM, proprietary reverse mortgages, and traditional Home Equity Lines of Credit (HELOCs) in 2025:

Reverse Mortgage vs. HELOC: Feature-by-Feature Comparison

Compare FeaturesHECM Reverse Mortgage
(FHA-Insured)
Proprietary Reverse Mortgage
(Non-FHA)
Traditional HELOC
(Home Equity Line of Credit)
Minimum Age to Qualify6255–62 (varies)No minimum
Line of Credit TermLifetime 10 years10–15 years draw period
Can It Be Frozen or Reduced?No (protected by FHA)*Yes*Yes*
Line of Credit GrowthYes, grows lifelongLimitedLimited
Monthly Mortgage Payments RequiredNoNoYes
Income Requirements Minimal (financial assessment)Minimal (financial assessment)Strict
Credit Score NeededNo minimumNo minimum620+ typical
Savings/Reserves NeededNoNoOften required
Closing CostsYes (can be financed)May be lowerYes (can be financed)
Fixed Interest Rate OptionAvailable for lump sumAvailableVariable common
Rate IndexCMT or SOFR (2025)VariesPrime rate
*Notes: HECM protected unless obligations unmet. Proprietary/HELOC can be frozen if values drop or payments missed (source: CFPB HELOC Brochure, accessed July 13, 2025). For more, see our HECM vs. HELOC Guide.

For a deeper look, see: HECM vs. HELOC Comparison: Features & Decision Guide

Why Older Homeowners Choose HECM Loans in 2025

Retirees use the HECM to:

  • Eliminate existing mortgage payments, freeing cash flow.
  • Supplement Social Security or pensions amid inflation.
  • Pay for healthcare, in-home care, or modifications (e.g., aging-in-place).
  • Fund home improvements or repairs.
  • Create a growing line of credit as a financial buffer.
  • Purchase a new home with HECM for Purchase, taking advantage of the higher 2025 limits for downsizing.

With over 1.2 million HECMs endorsed historically and enhanced limits this year, it’s a go-to for retirement planning without high-interest debt.

Frequently Asked Questions

Q.

Is a HECM the same as a reverse mortgage?

A HECM, or “Home Equity Conversion Mortgage,” is the most commonly used type of reverse mortgage, but it’s not the only option.  The HECM is a government-insured reverse mortgage program offered through the FHA.  Non-FHA reverse mortgages are also available from private lenders, so it’s always a good idea to explore all available programs and choose the one that best meets your needs.

Q.

What is the downside to a HECM loan?

The primary downside of a reverse mortgage is that the balance increases over time because no monthly mortgage payments are required.  With an increasing balance, the equity position of the property changes, reducing the potential inheritance for your heirs.  It is important to note that borrowers have the right to make payments at any time without penalty, though, and can eliminate the growing balance if they choose.

Q.

What happens when you outlive a HECM?

You cannot outlive a reverse mortgage loan.  A reverse mortgage borrower cannot have their loan called due and payable simply because the accrued balance exceeds the home’s value.  The loan remains in good standing as long as the borrower continues to live in the home as their primary residence while maintaining the home’s taxes and insurance.  You can come to a point where no more funds are available in your line of credit, but you can still live in the home beyond that point with no monthly mortgage payments due on the loan.

Q.

What is a HECM reverse mortgage purchase loan?

We have volumes of information about purchase reverse mortgages on our website.  We would also be more than happy to discuss specifics with you regarding your circumstances and provide you with exact numbers based on your age(s), desired property, area of the country, and other relevant factors (different parts of the country have varying purchasing costs).  You can also contact us by visiting our website and requesting information or calling us at 800-565-1722.
Q.

Can you refinance a HECM loan?

Yes.  If your home has increased in value and you have sufficient equity, you may be eligible to refinance your HECM for additional funds. HUD requires that the new loan offer a real benefit to you, and you must requalify based on income, credit, and property condition.  Refinancing is allowed after 18 months, but it’s only approved when it clearly helps the borrower.

Why the HECM Is Still the #1 Reverse Mortgage in 2025

  • Insured by the Federal Housing Administration
  • Provides tax-free cash without monthly mortgage payments
  • Lets you stay in your home for life
  • Comes with borrower protections you can’t get elsewhere
  • Flexible payout options: lump sum, credit line, or monthly income
  • Ideal for homeowners age 62+ who want peace of mind in retirement
Ready to Explore Benefits?  Get your free HECM quote with ARLO™ insights from All Reverse Mortgage—America’s #1 Rated HUD Approved Direct HECM lender with a 4.99/5-star rating!  Call (800) 565-1722 or click here for your free quote —simple, trusted, 100% secure!
What is a HECM Reverse Mortgage?