What is a HECM and how does it work?

If you're thinking about taking out a reverse mortgage, but you want to minimize the risks associated with this type of home loan, consider a home equity conversion mortgage (HECM).

Most loans backed by the value of your home require good credit, steady income and monthly payments.  A reverse mortgage — a type of home equity product designed specifically for older people — does not require any of that. With this type of product, you won't owe any payments on your loan until you stop living in the house as your primary residence. But as soon as that happens — whether it's because you move, sell the home, go to a long-term care facility or die — the full sum, plus interest, is due in full. 

That balloon payment makes it a risky endeavor, and as a result, the federal government regulates it more stringently than most home loan products. Plus, it offers a Federal Housing Administration-insured version of the product: HECM. This could be better suited for those who need a loan of less than $1,249,125 and prefer the protections that come with a government-backed product.

CNBC Select details HECM requirements, costs, how it differs from other types of reverse mortgages and the best lenders. 

HECM requirements

While HECMs (and other types of reverse mortgages) don't require applicants to have income or good credit, borrowers must meet requirements that other home equity products typically don't, such as:

• Age: 62 and older
• Equity: 50% or more
• Residency: Home must be your primary residence
• Education: You must complete a session with a Department of Housing and Urban Development (HUD) counselor
• Debt: You must not be delinquent on any federal debt, like student loans

HECM terms

HECMs also have unique terms that other loans do not. For example, you must pay your home insurance and property taxes on time and continue to live in the home full-time:

• Loan maximum: $1,249,125, as of 2026 
• On-time payments: You must make your taxes and insurance payments on time, every time. 
• Home maintenance: Your home must remain structurally sound, free of safety hazards and health violations. 
• Residency: You must live in the home full-time — at least six months and one day of the year — and complete an annual certification where you attest to living in the home full-time. If you don't live in your house for more than 12 months due to a medical reason or more than six months due to a non-medical reason, you must let your lender know. Your loan will come due at that time. 

How does a HECM differ from other types of reverse mortgages?

HECMs are the most popular type of reverse mortgage but not the only type. Many reverse mortgage lenders also offer proprietary jumbo reverse mortgages. These loans can typically be as large as $4 million. 

The key difference is that these reverse mortgages are not insured by the federal government. Additionally, the age requirement is typically 55. 

While the federal government does not require housing counseling before signing non-HECM reverse mortgages, most states require this. 

If you're looking for an HECM, here are some of our favorite lenders. 

For low rates: Longbridge Financial 

If you are looking to pay the minimum interest once your loan comes due, consider Longbridge Financial. It's known to have lower rates than its competitors. It also has no monthly fee, unlike most lenders. 

Additionally, people who have served in the military can get a $500 discount on closing costs. 

For in-person experience: Mutual of Omaha 

If you prefer to handle finances in person, Mutual of Omaha is a great option for HECM borrowers. It has dozens of in-person locations throughout the country and does not charge service fees for HECMs. 

For best customer service: Guild Mortgage

If you want a great customer service experience, consider Guild. It has ranked highly on J.D. Power's mortgage servicing survey and has an A+ grade from the Better Business Bureau. In addition to HECMs, it also offers reverse mortgage refinancing. 

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