If you’re a homeowner aged 62 or older, the HECM (Home Equity Conversion Mortgage) could be a powerful tool for your retirement.  It allows you to tap into your home’s equity—without selling your home or making monthly mortgage payments.  Insured by the Federal Housing Administration (FHA) and regulated by HUD, the HECM is the most widely used reverse mortgage in the U.S.

In this simple guide, we’ll explain exactly how a HECM works, who qualifies, and what you can expect in 2025.

ARLO teaching about the HECM (Home Equity Conversion Mortgage)

What Is a HECM Reverse Mortgage?

A HECM, short for Home Equity Conversion Mortgage, is a government-insured reverse mortgage program designed specifically for homeowners 62 and older. Unlike traditional loans, a HECM lets you convert a portion of your home equity into tax-free cash—while still keeping full ownership of your home.

There are no required monthly mortgage payments. You can stay in your home for life, and the loan is repaid only after you sell the home, move out permanently, or pass away.

How a HECM Reverse Mortgage Works

With a traditional mortgage, you make monthly payments to the lender.  With a HECM reverse mortgage, it works the other way around—you get paid, and there are no monthly payments required as long as you live in the home and keep up with property charges like taxes and insurance.

You choose how to receive the money:

  • Lump Sum: All at once (fixed interest rate)
  • Line of Credit: Draw as needed—plus unused funds grow over time
  • Monthly Payments: Get steady income for life (tenure) or a set term
  • Combo: Mix and match options based on what fits you best

You keep full ownership and control of your home.  When you leave the home for good, the loan is repaid—typically through the sale of the home.  And thanks to FHA insurance, your heirs will never owe more than the home is worth.

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

To be eligible for a HECM, here’s what’s required:

✅ You’re 62 or older
✅ You live in the home as your primary residence
✅ You own your home outright, or your current mortgage is small enough to pay off with the HECM
✅ You complete a HUD-approved counseling session
✅ You pass a financial assessment to confirm you can keep up with taxes, insurance, and maintenance
✅ You have no delinquent federal debts

Eligible homes include:

  • Single-family homes (up to 4 units, as long as you live in one)
  • FHA-approved condos
  • Some manufactured homes that meet HUD guidelines

HECM Costs and Fees

Yes, there are costs—but they’re clearly disclosed upfront, and they help protect you under the FHA insurance program.  Most borrowers roll these costs into the loan, so you don’t pay anything out of pocket.

Here’s what’s included:

  • Upfront FHA Insurance (UFMIP): Protects you and your heirs
  • Annual Mortgage Insurance (MIP): Keeps the loan compliant and protected
  • Closing Costs: Lender fee, appraisal, title, and other standard charges

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

What makes the HECM different from other equity loans is the FHA insurance.  It provides several key protections:

  • Guarantees your payments – even if your lender runs into trouble
  • Makes the loan non-recourse – meaning no personal liability beyond the home’s value
  • Allows flexible repayment – you can repay the loan at any time with no penalty

This insurance gives peace of mind to you and your family.  That’s why HECM has become the most trusted reverse mortgage in the country.

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

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 Qualify625562
Line of Credit TermLifetime 10 yearsLifetime
Can It Be Frozen or Reduced?No*Yes*No*
Line of Credit GrowthYes, grows for lifeLimitedYes, grows over time
Monthly Mortgage Payments RequiredYesYesNo
Income Requirements MinimalMinimalMinimal
Credit Score NeededNo minimumNo minimumNo minimum
Savings/Reserves NeededAnyAnyNot required
Closing CostsYes (can be financed)May be lowerYes (can be financed)
Fixed Interest Rate OptionAvailable for lump sumAvailable for lump sumAvailable for lump sum
Rate IndexTreasuryTreasuryTreasury
Important Notes:
HECM reverse mortgages are generally protected from being frozen or reduced, even if home values decline. However, access may be limited if taxes or insurance aren’t paid, or if the borrower no longer lives in the home.

Proprietary reverse mortgages and HELOCs can be frozen, reduced, or called due in the event of missed payments, property issues, or significant home value drops.

HELOCs often include balloon payments or repayment periods after the draw phase ends, which can put pressure on borrowers to refinance or repay quickly.

Source: Consumer Financial Protection Bureau HELOC Brochure (Accessed March 13, 2025).

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

Why Older Homeowners Choose HECM Loans

Many retirees use a HECM – Home Equity Conversion Mortgage to:

  • Eliminate their monthly mortgage payments
  • Supplement Social Security or pension income
  • Pay for healthcare or in-home care
  • Cover home improvement costs
  • Provide a financial safety net in retirement
  • Buy a new home using a HECM for Purchase

The flexibility and control you get with a HECM can make a real difference—without selling your home or relying on high-interest credit.

Frequently Asked Questions (FAQs)

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.

How does a HECM reverse mortgage work?

A reverse mortgage allows you to borrow money using your primary residence as collateral without the burden of making mandatory monthly mortgage payments.  The loan can be repaid once the last surviving borrower permanently vacates the property or when the home is sold.
Q.

Can you lose your house with a HECM?

Yes.  A reverse mortgage requires that you live in the home as your primary residence, maintain the property taxes and insurance, and upkeep your home.  Failure to do any of these will result in the loan being called due and payable, which could lead to foreclosure.
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.

How long must we occupy the home before we can apply for a HECM reverse mortgage?

There is no minimum time required.  You are eligible if you occupy the home as your primary residence.
Q.

Can we get an HECM if my spouse is under 62?

Yes, you can in all states except Texas, where the law prohibits it.  Your wife would be an approved non-borrowing spouse.  If you pass away before the funds are fully used, she would not have access to any remaining funds, but she would still be allowed to remain in the home for life without repaying the loan.
Q.

Can you use funds from the HECM to purchase a Second Home or an investment property?

You can use the funds for any purpose you wish.  HUD only frowns on a lender that provides you with a loan and sells you a financial product or service that may tie those funds up or put them at risk.  One product lenders should refrain from offering their reverse mortgage clients is annuities.  But you can use the funds to purchase other property if you wish.
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 give you exact numbers based on your age(s), desired property, area of the country, etc. (different parts of the country have different 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.

Q.

Can I use HECM to make a down payment on a house for my daughter?

You can use HECM loan proceeds for any reason you wish.  We have seen parents use the money for their children, and even grandparents who wanted to see some of their inheritance go to their grandchildren while they were still there to enjoy it.  It is your house and your money.  If you would like to help your daughter by giving her the cash for the down payment on her own home, you certainly may.

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?