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Home Equity Conversion Mortgage

Open the Door to Financial Freedom in Retirement with a HECM Reverse Mortgage

A reverse mortgage is a special type of home loan available to homeowners age 62 and older, allowing you to convert a portion of your home’s equity into cash—without selling your home or taking on monthly mortgage payments.* The most common type is the Home Equity Conversion Mortgage (HECM), which is the only reverse mortgage insured by the Federal Housing Administration (FHA). HECMs are available exclusively through FHA-approved lenders like Fairway, offering added protection and peace of mind.

Benefits: 

Increased Cash Flow

You can tap into a portion of your home equity as tax-free* cash—without impacting your Social Security or basic Medicare benefits in most cases. Use the funds however you choose, whether for daily expenses, home improvements, or added peace of mind.

* This advertisement does not constitute tax advice. Please consult a tax advisor regarding your specific situation.

Flexible Options, Peace of Mind for the Family

A reverse mortgage offers your loved one the freedom to stay in their home without the burden of monthly mortgage payments—unless they choose to make them. They’re still responsible for basic upkeep, property taxes, and homeowners insurance, just like with any mortgage.​

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The loan is not due until your parent or loved one permanently leaves the home. At that point, you or the estate will have up to 12 months to repay the loan—typically by selling the property. This federally insured program provides structure and flexibility, helping families plan ahead with confidence.

FHA Non-Recourse Protection

With a reverse mortgage insured by the FHA, you and your heirs are protected. If the loan balance ever exceeds the home’s value when it’s sold, neither you nor your family will be responsible for the difference—the FHA covers the shortfall. And if the home sells for more than what’s owed, any remaining proceeds go to you or your heirs.​

For example:
If the loan balance is $400,000 but the home sells for only $350,000, the FHA steps in to cover the $50,000 difference. Your heirs will never owe more than the home’s value—and if the home sells for $450,000, they would receive the $50,000 left over after repaying the loan.

General Requirements: 

  • You must be 62 years old or older

  • You must meet minimal credit and property requirements

  • You must receive reverse mortgage counseling from a HUD approved counseling agency

  • You must not be delinquent on any federal debt

  • Home must be a primary residence 

  • Property must be a single-family home, a 2- to 4-unit dwelling, or FHA-approved condo

Common Uses of a Reverse Mortgage:

  • Refinancing your existing mortgage. If you are carrying mortgage in retirement, refinancing to a reverse mortgage eliminates your obligation to make required monthly mortgage payments. You must maintain the home and pay your homeowners insurance and property taxes.

  • Supplement cash flow with a steady stream of funds

  • Bridge the Medicare gap from age 62 to 65

  • Use as a standby line of credit 

  • Fund major expenses, such as in-home care or home renovations

  • Debt consolidation

  • What is the interest rate on a HECM loan?
    Reverse mortgage interest rates can vary by lender and whether you select a fixed or variable product. The variable interest rate is composed of two parts: an index and a lender margin (both are stated in the mortgage contract). Fairway uses the weekly average of the Constant Maturity Treasury (CMT) as the index. To find out what the current reverse mortgage interest rates are, please reach out to Fairway retirement mortgage specialist.
  • What is the interest rate on a HECM loan?
    Reverse mortgage interest rates can vary by lender and whether you select a fixed or variable product. The variable interest rate is composed of two parts: an index and a lender margin (both are stated in the mortgage contract). Fairway uses the weekly average of the Constant Maturity Treasury (CMT) as the index. To find out what the current reverse mortgage interest rates are, please reach out to Fairway retirement mortgage specialist.
  • Who qualifies for a HECM?
    To qualify for a Home Equity Conversion Mortgage (HECM), you must: Be 62 or older Own your own home (must be an eligible property type) and reside in it as your primary residence Own the home outright or have significant equity in the home Meet minimal income and credit requirements Attend a financial counseling session
  • What are the pros and cons of a HECM?
    The pros of a Home Equity Conversion Mortgage (HECM): You can convert a portion of your home’s equity into cash, fixed monthly advances, or a growing line of credit (growth applies to the unused funds). You are not obligated to make a monthly mortgage payment — although you can — for as long as you meet the loan terms. Those terms include living in the home as your primary residence and paying the property-related taxes, insurance, and upkeep expenses. The cons of a HECM: The unpaid reverse mortgage loan balance grows over time. This is because interest and fees get tacked on the unpaid loan balance. Note: You do have the option to pay down the loan balance at any time — you can pay as much or as little toward it as you would like. You are drawing down on your home equity. Naturally, that likely means your heirs would have less money (or no money at all) coming to them from that particular asset.
  • Is a HECM a second mortgage?
    No. A Home Equity Conversion Mortgage (or HECM, commonly called a reverse mortgage) must be in the first lien position. The good news is the loan proceeds can be used at closing to pay off (refinance) an existing first or second mortgage as long as the lien(s) meets the seasoning guidelines (liens that have been in place longer than 12 months or resulted in less than $500 cash to the borrower. An exception now exists for some HELOCs).
  • How is a HECM repaid?
    When a maturity event occurs (e.g., the home is no longer the primary residence of the at least one borrower or a non-borrowing spouse), the loan becomes due and payable, and the home is typically sold to repay any outstanding loan balance. Because reverse mortgages are non-recourse loans, the sale of the home after loan maturity will always satisfy the loan repayment obligation — neither the borrower nor their heirs will be personally liable for any balance deficiency.
  • Can I buy a flipped home with a HECM for Purchase loan?
    The sales contract must be signed more than 90 days from the seller’s purchase of the property.
  • Is there a Mortgage Insurance Premium (MIP)?
    With a HECM for Purchase, you will be required to pay upfront and ongoing mortgage insurance premiums. These premiums are usually financed into the loan and not paid out of pocket – their purpose is to fund the non-recourse feature, which protects you or your heirs from being stuck with a bill if your loan balance is higher than what your home sells for when the loan matures and is due and payable.
  • I want to buy a new construction home — can I start the application before the home is completed?
    Yes. You can complete the HECM for Purchase application and begin the process of securing the loan, but the appraisal, and consequently the loan closing, cannot happen until the Certificate of Occupancy has been issued.
  • What source of funds (money) are allowed when you purchase a home with a HECM for Purchase loan?
    The money must come for your liquid assets (e.g., bank accounts, CDs, retirement accounts) or from the documented sale of other assets you may have (your present home for example).
  • Why is my down payment higher with an H4P loan compared to a conventional mortgage?
    Your down payment is higher initially because you will not be required to make monthly mortgage payments (except for property-related taxes and insurance). With a traditional mortgage, you could potentially lose more in cash flow over the years because of the consistently required payments.

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Copyright©2025 Fairway Independent Mortgage Corporation (“Fairway”) NMLS#2289. 4750 S. Biltmore Lane, Madison, WI 53718, 1-866-912-4800. All rights reserved. Fairway is not affiliated with any government agencies. These materials are not from HUD or FHA and were not approved by HUD or a government agency. Reverse mortgage borrowers are required to obtain an eligibility certificate by receiving counseling sessions with a HUD-approved agency. The youngest borrower must be at least 62 years old. Monthly reverse mortgage advances may affect eligibility for some other programs. This is not an offer to enter into an agreement. Not all customers will qualify. Information, rates, and programs are subject to change without notice. All products are subject to credit and property approval. Other restrictions and limitations may apply. Equal Housing Opportunity.

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