A Home Equity Conversion Mortgage (HECM) is a federally insured reverse mortgage designed for homeowners aged 62 and older. The tenure payment option specifically provides fixed monthly payments for the lifetime of the borrower while they occupy the home as their primary residence and meet obligations such as property taxes and insurance.

With a HECM tenure payment, instead of making monthly mortgage payments, the lender pays the homeowner a set monthly amount based on factors including age, home value (subject to HUD lending limits), and current interest rates. These payments continue as long as the borrower remains in the home, maintaining required loan terms.

Once the borrower vacates the home permanently—due to moving, selling, or passing away—the loan becomes due and payable, typically through the sale of the property. Importantly, HECMs are non-recourse loans, which means the repayment amount will never exceed the home’s value, protecting borrowers and heirs from owing more than the home’s worth.

This option suits seniors seeking predictable, steady income throughout retirement, especially those wanting to age in place without monthly mortgage obligations. It allows homeowners to convert home equity into cash flow while staying in their home.

Other HECM disbursement options include term payments, line of credit, modified tenure, modified term, and lump sum payments. Each option provides different payment structures tailored to various financial needs and retirement plans.

Key considerations when choosing tenure payments include commitment to living in the home long-term, ability to maintain ongoing home-related expenses, understanding loan balance growth due to accrued interest and fees, and participation in required HUD counseling to make an informed decision.

Common misconceptions include myths that the bank takes ownership of the home or that payments fluctuate with interest rates. However, the borrower retains home ownership, and tenure payments remain fixed regardless of interest changes.

For more detailed guidance on loan servicing and counseling, see our HECM Servicing Guidelines and Reverse Mortgage Counseling Requirement.

FAQs

Are HECM tenure payments taxable? These payments are generally considered loan advances and are not taxable as income. Consult a tax professional for personal advice.

What happens if I move to a nursing home? If the move is permanent (longer than 12 months), the loan becomes due, payments stop, and the home is usually sold to repay the mortgage balance.

Can I change my payment plan later? Some lenders allow switching payment options, but it varies by loan terms. Always confirm with your lender before making changes.

Do heirs inherit the debt? No. HECMs are non-recourse loans, so heirs are protected against owing more than the home’s value.

By understanding the HECM tenure payment option in depth, seniors can make confident decisions about using their home equity to secure reliable retirement income.

Authoritative Sources

This article is part of our comprehensive Reverse Mortgage glossary section at FinHelp.io, dedicated to helping homeowners understand reverse mortgage options and terms.