Home equity, without the principal and interest payment.

The Home Equity Conversion Mortgage (HECM) is the federal government's reverse-mortgage program, insured by FHA and originated by HUD-approved lenders. Available to homeowners 62 or older living in the home as their primary residence. The loan is non-recourse — meaning the borrower (or their estate) never owes more than the home is worth at the time of repayment.

Proceeds can be taken as a lump sum (fixed-rate only), a line of credit (variable rate, with a unique growth feature where the unused line grows over time), monthly term payments (fixed payments for a set number of years), monthly tenure payments (fixed payments for as long as borrower lives in the home), or any combination. The line-of-credit option is especially powerful: the unused portion grows at the same rate as the loan, so deferring use can substantially increase available funds over time.

HUD requires every borrower to complete one-on-one counseling with a HUD-approved counselor before applying. The counseling fee (typically $125-$200) is the borrower's only out-of-pocket cost during application; everything else can be financed into the loan.

HECM for Purchase combines a reverse mortgage with a home purchase in a single transaction. The borrower puts down a substantial portion (typically 40-60% of the purchase price, depending on age — older borrowers need less down) and finances the rest with a HECM. The result: a new primary home that requires no monthly principal and interest payment for as long as the borrower lives in it. Property taxes, homeowners insurance, and HOA dues remain the borrower's responsibility.

Common scenarios: downsizing from a paid-off home into a smaller property closer to family, moving from a high-cost area to a lower-cost one and pocketing the difference, or upsizing into a single-story home for accessibility while preserving liquid retirement assets. The down payment can come from the sale of the previous home, retirement accounts (with tax planning), or savings.

The new home must be the borrower's primary residence and must close within 60 days of completion (no construction loans through HECM for Purchase). All HECM rules apply — counseling required, age 62+, non-recourse.

Borrowers with an existing HECM can refinance into a new HECM if doing so makes financial sense — typically because home value has appreciated meaningfully (giving access to more proceeds), HECM lending limits have increased, or current interest rates would lower their effective cost. HUD requires the refinance to demonstrate a "tangible benefit" to the borrower; a 5x rule applies (additional benefit must be at least 5x the closing costs).

A HECM refinance triggers new counseling (waivable in some narrow cases), a new MIP calculation, and full underwriting. Not common — most HECM borrowers stay in the original loan — but worth modeling for borrowers who took a HECM in a prior limit cycle and have seen significant home appreciation.

Proprietary jumbo reverse mortgages are private (non-FHA) reverse mortgages for high-value homes that exceed the HECM maximum claim amount. They allow borrowers with home values up to $4-6 million to access more equity than a HECM would allow — the limit is set by the proprietary lender, not HUD.

Pros: higher loan amounts, often available to borrowers as young as 55 (varies by program), no FHA mortgage insurance premium. Cons: no HECM federal protections (technically still non-recourse, but read the fine print), typically higher interest rates than HECM, narrower lender list, condos and certain property types may not qualify.

Best for: borrowers with high-value primary residences who want to extract more equity than the $1,249,125 HECM limit allows, especially in high-cost markets like coastal California, NYC metro, and South Florida luxury enclaves.