What is a HECM?
HECM is short for Home Equity Conversion Mortgage, the FHA-insured kind of reverse loan. HUD's factors and a national limit determine the loan amount.
- The $1,249,125 2026 HECM limit applies to home value
- Upfront mortgage insurance of 2% on the maximum claim amount
- Yearly mortgage insurance of 0.5% on the balance
- 34 Lenders closed HECMs during HUD's most recent year
What is a HECM? FHA insures this reverse mortgage for owners 62 and older. Its full name is Home Equity Conversion Mortgage. For 2026, home values are counted up to $1,249,125. In the US, the term "reverse mortgage" nearly always refers to a HECM loan.
The name is meant literally. This mortgage turns home equity into money for you to use while securing the loan against the home. HUD makes the rules. FHA provides insurance, and a private lender makes the loan.
What FHA insurance does for you
HECM mortgage insurance separates it from a private reverse mortgage. At closing, you pay 2% of the maximum claim amount plus 0.5% each year on the balance. In exchange, you receive:
- Heirs cannot owe more than the value of the home. If the balance grows beyond the home's value, FHA's fund pays any gap. Heirs who want to keep the home pay whichever is lower: the balance or 95% of its appraised value.
- Funds keep coming to you. The insurance protects both your line of credit and monthly payments.
- All lenders follow the same rules. Every lender uses the same age, limit, factors and fee caps.
How a HECM decides what you can borrow
The expected rate, youngest borrower's age and home's value are the three figures that set the amount.
- The maximum claim amount equals the lower of the appraised value and $1,249,125.
- For your age and rate, that amount has HUD's principal limit factor applied.
- Upfront costs and any mortgage payoff are deducted from the result.
With the calculator's default rate, the $450,000 home example at age 75 uses HUD's factor of 0.415. The amount of the principal limit is $186,750. Subtracting $9,000 for mortgage insurance, $6,000 for the origination fee and $3,500 for other costs leaves $168,250 available. Use the calculator to work out your own figures, or find any factor in the PLF table.
The rules every HECM follows
| Rule | What it says |
|---|---|
| Age | Every borrower at least 62 |
| Limit | Counted home value tops out at $1,249,125 for 2026 |
| Upfront mortgage insurance | 2% of the maximum claim amount |
| Yearly mortgage insurance | 0.5% of the balance |
| Origination fee | It is $2,500 at minimum, or 2% on the first $200,000 plus 1% on the amount above it, and never more than $6,000. |
| First-year draw | Required payoffs plus 10% or 60% of the principal limit, whichever is greater |
| Counseling | A HUD-approved session before you apply |
| Home | Your main home, which stays insured and in good repair |
The fee requirements appear in 24 CFR 206.31 The Congressional Research Service sets out the first-year rule.
How a HECM differs from other borrowing choices
One of three reverse mortgage types is a HECM. The proprietary or jumbo reverse mortgage has no FHA insurance and is mostly used for homes above the limit. It is a private loan. This single-purpose loan covers one need, such as repairs.
The main difference between a HECM and a HELOC or home equity loan is payments. A HECM requires no monthly loan payment. The lender cannot freeze its line of credit while you keep the loan terms. With a HELOC, you make monthly payments and need income to qualify. Read more about a reverse mortgage vs HELOC.
A short history of the HECM mortgage
A Congressional Research Service history traces the growth of the program:
- The program started as a demonstration that allowed HUD to insure up to 2,500 HECMs.
- After remaining a demonstration for about 10 years, it became permanent.
- In FY2009, insurance for new HECMs peaked at about 115,000.
- The low-cost "HECM Saver" once had 0.01% upfront mortgage insurance, compared with 2.0% for the standard loan.
- During FY2016, 11% of HECMs used fixed rates.
HUD's latest twelve months of data show 24,529 HECMs closed, with only 12 fixed-rate. Today, most borrowers select an adjustable loan because it provides a line of credit.
Questions people ask
How does a HECM differ from a reverse mortgage?
One kind of reverse mortgage is a HECM, which has FHA insurance. All HECMs are reverse mortgages, while private and single-purpose reverse mortgages do not have HECM status.
What are the drawbacks of a HECM?
Upfront costs are higher than with most loans, mainly because of 2% mortgage insurance, and the balance increases each month. You must continue paying taxes, insurance and upkeep, while heirs receive less equity.
Is a home equity conversion mortgage a good idea?
This may suit an owner who plans to stay in the home, needs income and has nobody relying on the house. A short stay or limited funds for taxes and upkeep make this a poor choice. The guide to the advantages and disadvantages examines both sides.
What is a HECM in real estate?
In real estate, a HECM places a lien on the home just as any other mortgage does. You may sell the home at any time, but the loan must be paid off from the sale first.