Personal Finance & Estate › Credit, debt & mortgages › Mortgages & real-estate debt
Reverse mortgage (HECM)
FHA program since 1988· Government program
Depends on youExperts differ; the right answer depends on your situation.
An FHA-insured loan letting homeowners 62 and older draw on home equity with no monthly payments, repaid when they leave.
See it on the Personal Finance & Estate map →How it works
A HECM, insured by the FHA, lets homeowners 62 and older borrow against their primary residence with no monthly payments; the balance grows until the last borrower dies, sells or moves out for 12 months. Proceeds come as a lump sum, monthly checks or a growing credit line, sized by age, rates and home value, counting value only up to a 2026 cap of $1,249,125. HUD-approved counseling is required. The loan is non-recourse: heirs never owe more than the home is worth.
Why it matters for you
Depends on you: it can let a parent age at home without selling, but fees are high and equity shrinks. Unpaid property taxes or insurance can still cause foreclosure. Involve heirs and an elder-law attorney.
Rules, limits and sources (2026)
Congress created HECMs in the Housing and Community Development Act of 1987; 2014 HUD rules protected widowed non-borrowing spouses facing eviction, and a 2015 CFPB study found many ads misleading.
Watch out for
Planners debate the 'standby' strategy: opening a reverse-mortgage credit line early, leaving it to grow, and drawing on it only after bad market years.
Connections (3)
▸Reverse mortgage (HECM) is a payout version of Mortgages & real-estate debtStandard practice
How they connect
A reverse mortgage flips the usual loan: instead of monthly payments shrinking the balance, the lender pays the homeowner and the balance grows. It is still a lien secured by the house, repaid when the last borrower leaves, usually through a sale. Any existing mortgage must be paid off first, often with the reverse loan's proceeds.
When it applies
Private reverse loans date to 1961 in Maine; Congress created FHA-insured HECMs in 1987, and HUD launched them as a pilot in 1988–89.
How sure?
HUD's HECM rules (24 CFR Part 206) define the loan, and FHA endorsement data track how many are made each year.
Watch out for
Why so few eligible owners use them is debated: high costs, stigma from past abuses, or simply wanting to leave the house to heirs.
▸Long-term care (custodial care Medicare won't pay) is sometimes funded by Reverse mortgage (HECM)Depends on you
How they connect
Because Medicare doesn't pay for custodial care, some families tap home equity: a reverse mortgage can fund in-home aides so a parent stays at home. It fits nursing-home care poorly, since the loan comes due once the borrower is out of the home 12 straight months, often forcing a sale. Unspent proceeds can count against Medi-Cal's asset limit.
When it applies
Typical borrowers are in their late 60s and 70s; HUD-required counseling sessions routinely cover how care costs and moves affect the loan.
How sure?
HUD rules set the 12-month absence trigger; CFPB and AARP reports describe families using reverse loans to pay for care.
Watch out for
Whether a reverse mortgage beats selling, a HELOC or long-term care insurance for care costs depends on health, home value and heirs; planners disagree.
▸Reverse mortgage (HECM) can be misused in Elder financial abuseWatch out
How they connect
A reverse mortgage turns home equity into cash, which can make an older owner a target. Relatives or new 'friends' may push one and take the proceeds, salespeople may tie it to repairs or annuities, and a spouse left off the loan can face trouble later. Required counseling is meant to catch pressure.
When it applies
Among homeowners 62 and older; HUD requires independent counseling before any HECM, and California adds its own counseling and disclosure rules.
How sure?
HUD's HECM rules and California Civil Code Secs. 1923 onward set counseling and sales limits; the CFPB has warned about misleading reverse-mortgage ads aimed at seniors.
Watch out for
How often reverse mortgages are used to exploit seniors is not well tracked; many abuses surface only after the owner dies or the loan comes due.