Guide · Mortgages & Property
Reverse Mortgages Explained: How HECMs Turn Home Equity Into Cash
For homeowners 62 and older, a reverse mortgage flips the usual relationship with a lender — instead of you paying the bank every month, the bank pays you.
How much you can access
The amount available — the principal limit — depends on your home's value (capped at the FHA lending limit), your age, and current interest rates, via a Principal Limit Factor (PLF) published by HUD.
The non-recourse guarantee
Because HECMs are FHA-insured, neither you nor your heirs can ever owe more than the home is worth when it's time to repay — even if the loan balance, growing with accrued interest and mortgage insurance over many years, ends up larger than the home's value. The FHA insurance fund absorbs that shortfall, not the borrower's estate.
When the loan becomes due
Repayment is triggered when the last surviving borrower sells the home, moves out permanently (typically defined as more than 12 consecutive months), or passes away. Heirs can repay the balance to keep the home, sell it themselves and keep any remaining equity, or sign it over to the lender if it's underwater.
Frequently asked questions
Who is eligible for a HECM reverse mortgage?
The youngest borrower (or eligible non-borrowing spouse) must be 62 or older, the home must be the primary residence, and it must meet FHA property standards. Borrowers must also complete mandatory HUD-approved counseling before applying.
Will a reverse mortgage leave my heirs with debt?
No — HECMs are federally insured as non-recourse loans, meaning neither the borrower nor their heirs will ever owe more than the home is worth, even if the loan balance has grown larger than the home's value by the time it's repaid.
What ongoing obligations does a reverse mortgage borrower have?
Borrowers must continue living in the home as their primary residence, keep up with property taxes and homeowners insurance, and maintain the property. Falling behind on these can trigger default, just as with a forward mortgage's escrow requirements.
Why is the Principal Limit Factor lower for younger borrowers?
The loan is non-recourse and expected to accrue interest until repayment, which on average happens later for younger borrowers. To keep the math safe for the lender (and insurer), younger borrowers can access a smaller percentage of their home's value.