FHA-insured reverse mortgage for eligible homeowners age 62 or older who use an eligible home as a principal residence.
A Home Equity Conversion Mortgage (HECM) is an FHA-insured reverse mortgage for an eligible homeowner age 62 or older. It lets the homeowner borrow against home equity without the ordinary required monthly principal-and-interest payments of a forward mortgage, provided the borrower continues to meet the loan’s occupancy and property obligations.
HECM is pronounced “heck-um.” It is the most common U.S. reverse mortgage program. A private lender originates the loan, the Federal Housing Administration insures it, and the U.S. Department of Housing and Urban Development sets the program framework.
The HECM label tells a borrower that the loan follows federal reverse-mortgage rules rather than only a private lender’s proprietary contract. Those rules shape counseling, eligibility, mortgage insurance, proceeds, financial assessment, servicing, non-borrowing-spouse treatment, and repayment.
FHA insurance supports the borrower’s expected advances under the program and limits certain repayment exposure when the home is worth less than the debt. It does not make the proceeds a grant or remove the borrower’s responsibilities. Interest, mortgage insurance premiums, and eligible charges increase the loan balance over time.
The lender must evaluate the complete current program requirements, but the core borrower-facing conditions include:
Eligibility does not mean the homeowner can borrow all available equity. The HECM Principal Limit and mandatory obligations determine how much may remain as usable proceeds.
A homeowner first encounters HECM while comparing reverse-mortgage products and alternatives. After Reverse Mortgage Counseling, the borrower applies with an FHA-approved lender.
The lender reviews the borrower, property, existing liens, and expected property charges. An Appraisal supports the property value used in the program calculation. The lender then calculates the principal limit, subtracts mandatory obligations and set-asides, and presents the available Reverse Mortgage Payment Options.
At closing, the homeowner signs a note and security instrument, remains on title, and pays or finances eligible costs. After closing, the Mortgage Servicer manages advances, statements, occupancy certifications, and loan-status notices.
| HECM use | What happens |
|---|---|
| Existing-home HECM | Homeowner uses the proceeds to address existing liens and access remaining equity |
| HECM for Purchase | Buyer combines HECM proceeds with substantial cash or equity from another home to buy a new principal residence |
A HECM for Purchase does not eliminate the need for cash at closing. The buyer must cover the difference between the purchase price, closing costs, and available HECM proceeds.
A 68-year-old homeowner owns a principal residence worth substantially more than the remaining mortgage. The homeowner completes counseling, applies with an FHA-approved lender, and passes the program’s financial assessment. At closing, HECM proceeds pay off the old mortgage and closing obligations. The borrower places the remaining availability in an adjustable-rate line of credit rather than taking all funds immediately.
The borrower no longer has the old mortgage’s scheduled monthly payment, but must continue living in the home as the principal residence, maintaining it, and paying required property charges. Draws, interest, and financed charges increase the HECM balance.
HECM differs from Reverse Mortgage because reverse mortgage is the broad loan category. HECM is the FHA-insured program within that category.
It differs from a proprietary reverse mortgage, which is offered and funded under private program terms without FHA HECM insurance. Proprietary products may target different property values or borrower situations and may not provide the same features.
It differs from an FHA Loan used for an ordinary home purchase. Both use FHA insurance, but the HECM has reverse-mortgage eligibility, disbursement, balance-growth, and repayment rules.
It also differs from a Home Equity Line of Credit (HELOC). A HELOC generally requires periodic payments and later enters a repayment period. A HECM line of credit operates within the reverse-mortgage program and becomes part of a balance that is usually repaid when a maturity event occurs.