Reverse mortgage basics
How a HECM Reverse Mortgage Actually Works
A Home Equity Conversion Mortgage — a HECM — is the federally insured reverse mortgage available to many homeowners age 62 and older. It lets eligible homeowners access a portion of their home equity while continuing to live in the home. Here is how it works in plain English, without the jargon.
A reverse mortgage is not right for everyone. Mortgage Capital Services can walk you through how a HECM compares with other options and make sure you understand the responsibilities that continue after closing.
Who is generally eligible
In general, HECM eligibility depends on the age of the youngest borrower (typically 62 or older), the home being your primary residence, having sufficient equity, and the ability to meet ongoing obligations like property taxes and insurance. The property must also meet program requirements. Exact eligibility depends on your situation and current program rules.
How you can receive the funds
Depending on the program and your circumstances, available proceeds may be structured in different ways — for example, as a line of credit you draw on as needed, or through other available options. The amount available depends on factors such as the age of the youngest borrower, the home's value, and current program limits.
Importantly, you do not make required monthly principal and interest payments on a reverse mortgage the way you would on a traditional mortgage. Instead, the loan balance generally grows over time and is repaid later.
When the loan is repaid
A reverse mortgage is a loan that must be repaid. It typically becomes due when the last borrower no longer lives in the home as a primary residence — for example, if the home is sold, or upon moving out or the passing of the last borrower. At that point the loan is repaid, often from the sale of the home, and any remaining equity goes to the borrower or their heirs. Because the balance grows over time, a reverse mortgage reduces the equity in your home.
Required counseling
Before obtaining a HECM, borrowers are required to complete independent counseling with a HUD-approved housing counseling agency. That session covers how the loan works, the costs, alternatives, and the effect on your estate and any benefits — so you can make an informed decision.
Responsibilities continue
With any reverse equity loan, the borrower must continue to meet loan obligations, including property taxes, homeowners insurance, property maintenance, and any applicable HOA or similar obligations. Failing to keep up with these responsibilities can cause the loan to become due.
Important: This article is educational and is not financial, legal, or tax advice, or a commitment to lend. A reverse mortgage is a loan that must be repaid. This material is not from HUD or FHA and was not approved by HUD, FHA, or any government agency. All loans are subject to credit approval, property eligibility, and program requirements. Mortgage Capital Services LLC, NMLS #2694379 · Samantha S. Peel, Mortgage Loan Officer, NMLS #2685482, licensed in Georgia & South Carolina · Equal Housing Opportunity.