Reverse Mortgage HECM Basics: What Homeowners 62+ in NC, SC, and GA Need to Know

What Is a HECM and Who Backs It?

A Home Equity Conversion Mortgage, commonly called a HECM, is the only reverse mortgage product insured by the federal government. It is administered by the U.S. Department of Housing and Urban Development (HUD) and insured through the Federal Housing Administration (FHA). Because of that federal backing, HECM loans carry specific consumer protections that private reverse mortgage products do not always include.

To be eligible, at least one borrower on the title must be 62 years of age or older, the property must be the borrower's primary residence, and the borrower must have enough equity in the home to meet program requirements. Eligible property types generally include single-family homes, HUD-approved condominiums, and certain manufactured homes that meet FHA standards. Keith Lopez (NMLS #2814077) at Waypoint Mortgage can walk you through whether a HECM or another loan structure fits your situation, and can refer you to a licensed HECM specialist if that path makes the most sense for you.

You can learn more about how reverse mortgages fit into the broader landscape of home loan options at our loan options page.

How Does the Loan Balance Grow Over Time?

This is the part that surprises many homeowners. With a traditional mortgage, your balance goes down every month as you make payments. With a HECM, the opposite happens. Because no monthly mortgage payment is required, the interest that would normally be paid each month is instead added to the outstanding loan balance. FHA mortgage insurance premiums are also added over time. The result is a balance that grows, sometimes called negative amortization.

The loan does not become due and payable as long as at least one borrower continues to live in the home as a primary residence, keeps up with property taxes and insurance, and maintains the property. The balance is settled when the last borrower permanently leaves the home, sells the property, or passes away. At that point, the amount owed cannot exceed the value of the home because HUD's insurance covers any shortfall. This non-recourse feature means neither the borrower nor the heirs owe more than the home is worth at the time of repayment.

Because the balance grows, a HECM is generally not the right tool for someone who wants to preserve maximum equity for heirs. It is worth having a clear conversation about your long-term goals before deciding.

What Are the Payout Options?

HUD allows HECM borrowers to receive their proceeds in several ways, and the right choice depends on your financial goals. The main options are: a lump sum (available only with a fixed-rate HECM), a line of credit that you draw from as needed, monthly payments for a set term, monthly payments for as long as you live in the home (called tenure payments), or a combination of a line of credit and monthly payments.

The line of credit option has a feature worth understanding. The unused portion of the credit line grows over time at the same rate as the loan's interest rate. That means the available credit can increase even if home values stay flat. This can make the line of credit option appealing for homeowners who want a financial safety net rather than immediate cash.

Each payout structure has trade-offs related to how quickly the balance grows and how much flexibility you retain. A HUD-approved counselor will review these options with you in detail before you apply.

What Is the Required HUD Counseling Session?

Before a lender can process a HECM application, HUD requires every prospective borrower to complete a counseling session with an independent, HUD-approved housing counselor. This is not optional and it is not provided by the lender. The counselor has no financial stake in whether you proceed, which is intentional.

The session covers how HECM loans work, the costs involved, alternatives to a reverse mortgage, and your rights and obligations as a borrower. Counseling can often be completed by phone or in person. You will receive a certificate of completion that must be submitted with your loan application. To find a HUD-approved counselor, visit the HUD website at hud.gov or call the HUD Housing Counseling Line at 1-800-569-4287.

This counseling requirement exists to make sure borrowers understand what they are agreeing to. It is one of the strongest consumer protections built into the HECM program.

What Are Your Ongoing Obligations as a HECM Borrower?

A common misconception is that a reverse mortgage means you have no housing costs. That is not accurate. Even though no monthly mortgage payment is required, you are still responsible for paying property taxes on time, maintaining homeowners insurance, paying any applicable HOA dues, and keeping the property in reasonable condition.

Failing to meet these obligations can trigger a loan default and potentially lead to foreclosure, even on a HECM. Lenders are required to conduct annual occupancy checks to confirm the home remains your primary residence. If you move to a care facility for more than 12 consecutive months, the loan can become due.

Before committing to a HECM, it is worth honestly assessing whether your income and assets are sufficient to cover these ongoing costs for the foreseeable future. A financial advisor or HUD counselor can help you model this out.

What Happens to the Home When the Borrower Passes Away or Moves Out?

When the last surviving borrower passes away, sells the home, or permanently moves out, the HECM loan becomes due. Heirs typically have several options. They can sell the home and use the proceeds to repay the loan balance. They can refinance the balance into a traditional mortgage to keep the home. Or, if the loan balance exceeds the home's value, they can deed the property to the lender and walk away with no personal liability, because the FHA insurance covers the shortfall.

HUD guidelines generally give heirs up to six months to arrange repayment, with possible extensions. The amount heirs owe is capped at 95 percent of the appraised value of the home at the time of repayment, even if the loan balance is higher. This non-recourse protection is a key feature of the federally insured HECM program.

If preserving the home for heirs is a priority, it is worth discussing that goal openly before choosing a HECM. There may be other loan structures, such as a cash-out refinance, that better align with that objective. You can explore refinance options at our Refinance page.

What Is a HECM for Purchase?

Most people think of a reverse mortgage as something you do with a home you already own. But HUD also offers a HECM for Purchase, which allows eligible buyers 62 and older to purchase a new primary residence using a HECM in a single transaction.

With a HECM for Purchase, the buyer makes a substantial down payment (the exact amount depends on age, home price, and current interest rates at the time of application) and the HECM covers the remainder. No monthly mortgage payment is required on the HECM portion, though the same tax, insurance, and maintenance obligations apply. This option can be useful for buyers who want to downsize, relocate closer to family, or move to a more accessible home without tying up all of their liquid assets in the purchase.

The HECM for Purchase requires the same HUD counseling as a standard HECM. It is a specialized product, and working with a loan officer experienced in this program is important.

Can Keith Lopez at Waypoint Mortgage Help With a HECM?

HECM origination is a specialized area that requires specific licensing and expertise. Keith Lopez (NMLS #2814077) at Waypoint Mortgage is happy to discuss whether a reverse mortgage fits your overall financial picture and can refer you to a licensed HECM specialist if that is the right direction. Not every mortgage professional originates HECMs, and being transparent about that is part of giving you honest guidance.

If you are exploring your options as a homeowner 62 or older in North Carolina, South Carolina, or Georgia, a Mortgage Strategy Session is a good starting point. You can review the full range of loan options at our loan options page and schedule a free consultation to talk through what makes sense for your situation.