HECM Calculator

What is a HECM?

A Home Equity Conversion Mortgage, commonly referred to as a HECM, is a federally insured loan program backed by the U.S. Department of Housing and Urban Development. It gives homeowners aged 62 and older a way to convert a portion of their accumulated home equity into accessible funds without selling the property, surrendering ownership, or taking on a new monthly mortgage payment obligation.

The program has been in place for decades and remains the most regulated and consumer-protected form of reverse mortgage available in the country today. According to HUD data, more than 1.3 million HECM loans have been insured since the program launched in 1990, reflecting how consistently it has served as a retirement planning tool for older American homeowners.

What is a Reverse Mortgage HECM?

A reverse mortgage HECM is the government-backed version of a reverse mortgage, insured through the Federal Housing Administration. Where a traditional mortgage requires borrowers to make monthly payments toward a shrinking loan balance, a reverse mortgage HECM operates differently. The loan balance grows over time as interest accrues, and repayment is only triggered when the borrower permanently leaves the home, sells the property, or passes away.

Because the Federal Housing Administration insures the program, borrowers receive a non-recourse guarantee. Neither the borrower nor their heirs will ever owe more than what the home sells for at the time of repayment, regardless of how large the loan balance has grown over the years.

How is the HECM Loan Amount Determined?

Three primary factors work together to determine how much a borrower can access. The first is age. The older the youngest borrower on the loan, the greater the percentage of home equity that becomes available. The second factor is the home's appraised value, measured against the current FHA lending limit of $1,209,750 for 2025. The third is the expected interest rate at the time of closing, where lower prevailing rates generally produce higher loan proceeds.

HUD applies these figures to a Principal Limit Factor, which is a published percentage table updated periodically. The resulting amount is the gross maximum a borrower can access before mandatory costs and any existing mortgage payoffs are subtracted.

To give a clearer picture of how age and home value interact to influence borrowing potential, the table below shows estimated Principal Limit Factor percentages across common borrower ages at a sample expected interest rate:

Estimated HECM Principal Limit Factors by Age (Sample figures based on a 5.5% expected interest rate — actual PLFs vary with market rates)

Figures shown are gross estimates before closing costs, mortgage insurance premiums, and existing lien payoffs are deducted. Speak with a licensed HECM specialist for figures specific to your situation.

What Costs Come With a HECM Loan?

Several costs are associated with getting a HECM. The most significant is the Mortgage Insurance Premium, which includes an upfront charge of 2% of the home's appraised value and an annual premium of 0.5% of the outstanding loan balance. This insurance funds the FHA guarantee and protects borrowers if their lender ever fails to meet its payment obligations.

Other typical costs include an origination fee, third-party closing costs such as title insurance and appraisal fees, and servicing fees charged over the life of the loan. Most of these costs can be financed into the loan itself rather than paid out of pocket at closing, which is why understanding your net proceeds figure matters more than the gross loan amount alone.

What Are the HECM Eligibility Requirements?

To qualify for a HECM, all borrowers listed on the title must be at least 62 years of age. The property must serve as the borrower's primary residence, meaning vacation homes, rental properties, and second homes are not eligible. Accepted property types include single-family homes, HUD-approved condominiums, and manufactured homes that meet FHA standards.

Borrowers are also required to complete a counseling session with a HUD-approved independent counselor before the loan can proceed. This session covers the full scope of how the loan works, what obligations exist throughout the loan term, and what alternatives may be worth considering based on individual financial circumstances.

How Can HECM Funds Be Received?

Borrowers have several options for how they receive their funds. A lump sum provides the full available amount at closing and is the only option compatible with a fixed interest rate. A monthly tenure payment delivers equal installments for as long as the borrower occupies the home as their primary residence. A monthly term payment provides fixed amounts over a specific period chosen at the time of closing.

A line of credit allows borrowers to draw funds as needed up to the available limit, and any unused portion of the line grows over time at the same rate as the loan interest. Many borrowers choose a combination of these options, such as taking a smaller lump sum at closing while preserving the remainder as a growing line of credit for future needs.

What Happens to the HECM When the Borrower Leaves the Home?

When the last borrower permanently vacates the property, the loan becomes due and payable. In most cases the home is sold to repay the outstanding balance. If the sale proceeds exceed what is owed, the remaining equity belongs to the borrower or their heirs. If the home sells for less than the loan balance, the FHA insurance covers the shortfall and the heirs owe nothing beyond the home's sale proceeds.

Heirs also retain the option to keep the property by refinancing the HECM balance into a conventional mortgage, provided they qualify for that financing independently within the required timeframe.

Is HECM the Right Option for Every Homeowner?

A HECM works well for homeowners who have significant equity, plan to remain in their home long term, and want to supplement retirement income or cover substantial expenses without taking on new monthly payment obligations. It tends to be less suitable for homeowners who anticipate moving within a few years, since the upfront costs would outweigh the benefits gained over a short period.

Speaking with a HUD-approved counselor and a licensed reverse mortgage specialist before making a decision gives borrowers the clearest and most accurate picture of whether the program genuinely fits their long-term financial goals.

Who Oversees and Regulates the HECM Program?

The HECM program is regulated by HUD and administered through FHA-approved lenders across the country. Borrowers are protected by federal guidelines that govern how lenders must communicate loan terms, process applications, and manage servicing responsibilities over the life of the loan.

The mandatory counseling requirement exists specifically to ensure that no borrower enters a HECM without a thorough and independent understanding of the full commitment involved. This layer of oversight is what separates the HECM from proprietary reverse mortgage products offered through private lenders outside the federal program.

Frequently Asked Questions

Can a HECM borrower be removed from their home by the lender?

A lender cannot remove a borrower from their home as long as the borrower continues to meet the basic loan obligations. These obligations include living in the property as a primary residence for the majority of each calendar year, keeping property taxes and homeowners insurance current, and maintaining the home in reasonable condition. As long as these conditions are met, the borrower retains the right to remain in the home for life regardless of how large the loan balance grows.

Does a HECM affect Social Security or Medicare benefits?

HECM proceeds are generally not considered taxable income and do not affect Social Security or Medicare benefits in most circumstances. However, borrowers who receive Medicaid or Supplemental Security Income should be aware that holding undistributed HECM funds in a bank account beyond a certain monthly threshold could affect their eligibility for those need-based programs. Consulting with a benefits counselor or financial advisor before drawing funds is strongly recommended for borrowers in this situation.

Can a surviving spouse stay in the home after the borrowing spouse passes away?

Eligible non-borrowing spouses may be permitted to remain in the home after the borrowing spouse passes away under certain conditions established by HUD. To qualify for this protection, the surviving spouse must have been legally married to the borrower at the time the loan closed and must have been properly disclosed as a non-borrowing spouse in the loan documentation. The surviving spouse must also continue meeting all ongoing loan obligations, including paying property taxes and maintaining homeowners insurance.

What is the difference between a HECM and a proprietary reverse mortgage?

A HECM is federally insured through FHA and subject to HUD guidelines, including loan limits, mandatory counseling, and borrower protections such as the non-recourse guarantee. A proprietary reverse mortgage is a private product offered by individual lenders without federal insurance backing. Proprietary products sometimes allow access to higher loan amounts for homes valued above the FHA lending limit, but they do not carry the same consumer protections or government oversight that come with the federally insured HECM program.

How does a HECM line of credit differ from a home equity line of credit?

A traditional home equity line of credit, commonly known as a HELOC, requires monthly interest payments and can be reduced or frozen by the lender if home values decline or the borrower's financial situation changes. A HECM line of credit requires no monthly payments, cannot be frozen or reduced by the lender as long as loan obligations are met, and the unused portion of the credit line grows over time at the loan's interest rate. This growth feature means that waiting to draw from the HECM line of credit can result in more available funds later, which is a meaningful advantage for borrowers focused on long-term financial planning.

Mortgage Rates

Interest rates referenced on this page are shown for illustrative and educational purposes only. Actual rates vary based on the lender, loan structure, borrower profile, and market conditions at the time of application. Speaking with a licensed reverse mortgage specialist gives you the most accurate picture of what you may qualify for based on your specific situation.