Reverse Mortgages
What is a reverse mortgage?
A reverse mortgage also known as a Home Equity Conversation Mortgage (HECM) is the safest and most popular type of reverse mortgage on the market. With over one million seniors enjoying the benefits of this product nationwide, HECM’s are the only reverse mortgage insured by the federal government through the Federal Housing Administration (FHA), a division of the Department of Housing and Urban Development (HUD).
This program allows home-owners ages 62 and older to convert part of their home’s equity into tax-free proceeds. There is never a required monthly mortgage payment on this loan and there is no prepayment penalty if the loan is paid back in part or in full.
HECM’s are non-recourse loans, which provide protection for borrowers and their heirs. It means that borrowers and their estate will not be responsible for repaying more than the home’s value, even if the outstanding loan balance exceeds the home’s market value. This protection safeguards heirs from inheriting a debt that exceeds the value of the home.
Because the proceeds are a tax-free loan, there is generally no impact on Social Security or Medicare benefits. However, income-based programs may view the HECM as an additional cash-flow source. It is always best to consult an adviser first before pursuing the HECM.
Ways to receive the funds from the HECM:
• A single lump sum disbursement
• Equal monthly disbursements for as long as the borrower remains in the home
• A line of credit
• A combination of monthly distributions & line of credit
Once a heir inherits the property, they can:
• Sell the home & the proceeds of the sale will pay off the HECM with any remaining equity being given to the heir
• Refinance the home into the heir’s name & pay off the HECM balance
Buying Your next Home with a Reverse Mortgage
A reverse mortgage for purchase (H4P) allows eligible borrowers age 62 or older buy a new primary residence in one transaction. According to HUD Mortgagee Letter 2025-22, the 2026 lending limit for Missouri and Florida is $1,249,125.
• You provide the required down payment (savings &/or sale proceeds)
• HECM covers the rest with no monthly principal-&-interest payment
How the H4P Transaction Closes
Shop for a home, make an offer, and apply for a HECM simultaneously. At closing, your down-payment contribution is wired to the title company.
There is no required monthly principal and interest payment with this type of loan as long as you meet the loan obligations.
According to HUD documentation, the down payment or contribution typically ranges from 40 to 60 percent of the purchase price depending on the youngest borrower's age and current market interest rates.