Reverse Mortgages in Massachusetts: How FHA HECM Loans Work

‍Discover how Massachusetts homeowners aged 62 and older can eliminate required monthly mortgage payments, access home equity, and continue owning the home they love.

For many Massachusetts homeowners, their home is their largest financial asset. After years of making mortgage payments, raising a family, and building equity, retirement should be a time to enjoy what they've worked so hard to achieve.

But retirement can also bring financial challenges. Property taxes, insurance, healthcare expenses, home improvements, and everyday living costs continue to increase, even when monthly retirement income stays the same.

What if you could use the equity you've already built in your home to improve your monthly cash flow without having to sell or move?

That's where an FHA-insured Home Equity Conversion Mortgage (HECM), commonly called a reverse mortgage, may help.

At Onshore Mortgage, LLC, we help Massachusetts homeowners understand how HECM reverse mortgages work, including the benefits, costs, responsibilities, and protections available to borrowers and their families.

What Is a HECM Reverse Mortgage?

A Home Equity Conversion Mortgage (HECM) is a federally insured reverse mortgage designed for eligible homeowners aged 62 and older.

Unlike a traditional mortgage, which generally requires monthly principal and interest payments, a HECM allows qualified homeowners to access a portion of their equity without making required monthly principal and interest payments.

You continue to own your home. You remain on the title. And you can continue living in the property as your primary residence, provided you meet the loan requirements.

If you currently have a mortgage, the HECM proceeds must first pay off your existing mortgage balance. Any remaining available proceeds, after applicable costs and required set-asides, can be accessed through eligible payment options.

A HECM is not free money. Interest and applicable mortgage insurance charges accrue over time, increasing the loan balance. The loan generally becomes due when the last borrower dies, the home is sold, the property is no longer the borrower's primary residence, or another loan obligation is not met, subject to applicable protections.

Eliminate Your Required Monthly Mortgage Payments

One of the most significant advantages of a reverse mortgage is the ability to eliminate an existing monthly mortgage principal and interest payment.

Imagine you've spent decades paying your mortgage and now want additional financial flexibility during retirement.

Instead of using a large portion of your retirement income toward that monthly payment, a HECM may allow you to pay off the existing mortgage and eliminate the requirement to make monthly principal and interest payments on the new loan.

That money can potentially remain available in your monthly budget for groceries, home maintenance, healthcare, travel, or everyday expenses.

Important: You must continue paying property taxes, homeowners insurance, and applicable association charges, maintain the property, and comply with occupancy requirements.

For eligible Massachusetts homeowners, eliminating a required mortgage payment can make a meaningful difference in retirement cash flow.

How Can You Use Your HECM Reverse Mortgage Funds?

One of the biggest advantages of an FHA-insured HECM reverse mortgage is the flexibility it provides. In addition to eliminating required monthly mortgage principal and interest payments, qualified Massachusetts homeowners can use their available equity to help meet a variety of financial needs.

Common uses for reverse mortgage funds include:

• Eliminating existing mortgage payments: Pay off your current mortgage and eliminate required monthly principal and interest payments.
• Supplementing retirement income: Help cover groceries, utilities, everyday expenses, and other living costs.
• Consolidating debt: Pay off credit cards, personal loans, or other outstanding debts.
• Covering healthcare expenses: Help manage medical bills, in-home care, or other healthcare-related costs.
• Making home improvements: Complete necessary repairs, renovations, or accessibility upgrades.
• Establishing an emergency fund: Use an adjustable-rate HECM line of credit to access available funds when needed.
• Helping family members: Assist children or grandchildren with education expenses or other financial needs.

How Do You Receive Your Reverse Mortgage Funds?

Depending on the HECM loan type, qualified borrowers may choose from several payment options:

• Lump Sum: Receive available proceeds in a single disbursement, subject to FHA disbursement limitations.
• Monthly Payments: Receive scheduled payments to supplement retirement cash flow.
• Line of Credit: Withdraw available funds as needed, subject to the loan's terms.
• Combination of Options: Combine monthly payments with a line of credit for additional flexibility.

Adjustable-rate HECM loans offer multiple disbursement options, while fixed-rate HECMs generally provide a single-disbursement lump sum.

Important: HECM proceeds must first satisfy existing mortgage liens and applicable required charges or set-asides. Borrowers remain responsible for property taxes, homeowners insurance, property maintenance, and other loan obligations.

Do You Still Own Your Home With a Reverse Mortgage?

Yes.

One of the most common misconceptions about reverse mortgages is that the lender takes ownership of the home.

With a HECM reverse mortgage, you retain title to your property. Just like a traditional mortgage, the loan is secured by your home.

You can continue living in the property as your primary residence, make improvements, and sell it when you choose.

If you sell the home, the reverse mortgage balance is repaid from the sale proceeds. Any remaining equity belongs to you.

Your obligations to maintain the property, pay required property charges, and comply with the terms of the loan remain in effect.

What Happens to Your Home When You Pass Away?

This is one of the most important questions families ask about reverse mortgages.

Many homeowners want to enjoy a more comfortable retirement while preserving as much of their estate as possible for their children.

A HECM includes important protections for both the borrower and their heirs.

When the loan becomes due after the death of the last borrower, and there is no eligible non-borrowing spouse who can remain under applicable protections, heirs generally have several options.

Option 1: Sell the home and keep the remaining equity.

Your heirs can sell the property, repay the outstanding reverse mortgage balance, and retain any remaining proceeds after selling expenses and other applicable obligations.

Option 2: Keep the home.

Your heirs may be able to repay the balance using their own funds or new financing. HECM rules also provide a special payoff option when the balance exceeds the property's appraised value.

Option 3: Use the HECM non-recourse protection.

If the amount owed exceeds the property's value, special FHA protections limit the amount recoverable through the property.

Example: How a Reverse Mortgage Can Protect Your Family's Equity

Let's assume that when the loan becomes due:

• The home is worth $700,000.*
• The outstanding reverse mortgage balance is $350,000.*
• The heirs decide to sell the home.

After the mortgage is paid off, approximately $350,000* in equity remains before real estate commissions, closing expenses, other liens, and potential taxes.

The heirs are entitled to the remaining equity. The lender does not automatically receive the entire value of the home.

This is an important distinction that many families don't fully understand when first exploring a reverse mortgage.

What Is the HECM 95% Appraisal Rule?

HECM loans include a non-recourse feature.

Suppose the loan balance has grown to $450,000,* but the home's appraised value is only $400,000 *when the loan becomes due.

Under applicable HECM heir-payoff rules, eligible heirs may generally satisfy the debt for 95% of the property's current appraised value.

In this example:

• Current appraised value: $400,000*
• Outstanding loan balance: $450,000*
• 95% of appraised value: $380,000*

The eligible heirs may be able to retain the home by satisfying the loan for $380,000* rather than paying the full $450,000* balance.

This rule is especially valuable when the outstanding HECM balance exceeds the property's current value. It does not mean heirs can always purchase a home for 95% of its value when the loan balance is lower.

Actual payoff options, deadlines, and documentation requirements must be reviewed with the loan servicer.

How Does a HECM Line of Credit Work?

One of the most useful features of an adjustable-rate HECM is the ability to establish a line of credit.

Instead of withdrawing every available dollar immediately, qualified borrowers can leave some of their available proceeds in a credit line and access them later.

This can be particularly helpful for homeowners who want a financial reserve for unexpected expenses.

Possible uses include:

• Future home repairs and improvements
• Healthcare and caregiving expenses
• Unexpected financial emergencies
• Supplemental retirement cash flow
• Other personal financial needs

The HECM Credit Line Growth Feature

An adjustable-rate HECM line of credit has a feature that distinguishes it from a traditional home equity line of credit.

The unused portion of your available borrowing capacity can grow over time.

The credit line growth rate is based on the loan's interest rate plus the applicable annual mortgage insurance premium rate.

This does not mean your home is appreciating at that rate or that you're earning interest in a savings account.

Instead, the amount available for future borrowing can increase under the terms of the HECM.

For homeowners who don't immediately need all their available proceeds, this feature may provide valuable flexibility during retirement.

Credit line growth is not guaranteed investment income, and the terms of the loan, interest rate changes, maximum secured amount, and other program rules must be considered.

Who Qualifies for a HECM Reverse Mortgage in Massachusetts?

HECM loans are designed for eligible homeowners aged 62 and older.

To qualify, borrowers generally must meet the following requirements:

• ‍Age: Borrowers must be at least 62 years old.
• ‍Primary residence: The property must be occupied as the borrower's principal residence.
• ‍Home equity: There must be enough available equity, or sufficient additional funds, to pay off existing mortgages and other required obligations.
• ‍Property eligibility: Eligible properties can include one- to four-family homes, certain condominiums, and qualifying manufactured homes, subject to FHA requirements.
• ‍Financial assessment: The lender evaluates credit history, income, assets, and the homeowner's ability to meet continuing property obligations. A required set-aside may apply.
• ‍Counseling: Borrowers must complete counseling with an appropriately approved independent reverse mortgage counseling agency.

Having an existing mortgage does not automatically disqualify you. In fact, paying off a current mortgage and eliminating the required monthly principal and interest payment is one reason homeowners explore HECM financing.

Massachusetts Offers Additional Reverse Mortgage Consumer Protections

Massachusetts has specific borrower protections in addition to federal HECM requirements.

Independent Counseling

Reverse mortgage counseling helps homeowners understand the loan's features, costs, alternatives, and possible effects on their financial future.

Massachusetts requires counseling through an appropriately approved independent third-party organization.

Counseling may be completed in person, by telephone, or through qualifying real-time video conferencing.

Seven-Day Cooling-Off Period

Massachusetts law provides a seven-day cooling-off protection following acceptance of a reverse mortgage loan commitment.

This helps ensure homeowners have time to consider the transaction before proceeding.

Right to Cancel

For applicable HECM refinance transactions, borrowers generally have a separate three-business-day right to cancel after closing.

These protections are designed to help Massachusetts homeowners make informed decisions without unnecessary pressure.

Are Reverse Mortgage Proceeds Taxable?

Generally, no.

According to the IRS, proceeds received from a reverse mortgage are loan advances rather than taxable income.

Whether you receive available proceeds through a permitted lump sum, monthly disbursements, or line of credit, the money borrowed is generally not subject to federal income tax simply because it was received.

However, homeowners should consult a qualified tax professional regarding their individual circumstances.

Will a Reverse Mortgage Affect Social Security, Medicare, Medicaid, or SSI?

A reverse mortgage generally does not affect regular Social Security retirement benefits or Medicare eligibility simply because you receive loan proceeds.

However, needs-based programs such as Supplemental Security Income (SSI) and certain Medicaid or MassHealth programs have income and asset rules.

Money received from a reverse mortgage and retained in a bank account could become a countable resource for some benefits programs.

For this reason, homeowners receiving needs-based assistance should speak with an appropriate benefits specialist before withdrawing or retaining substantial reverse mortgage proceeds.

HECM Reverse Mortgage vs. Traditional HELOC (Home Equity Line Of Credit)

Both products allow homeowners to access home equity, but they work differently.

A traditional HELOC generally requires monthly payments. The lender may also have the ability to freeze or reduce available borrowing capacity under certain conditions.

An adjustable-rate HECM line of credit does not require monthly principal and interest payments while the borrower meets the loan's obligations. It also includes a credit line growth feature that traditional HELOCs generally do not offer.

However, a HECM has age restrictions, FHA mortgage insurance costs, and different long-term repayment considerations.

For homeowners with adequate income who want to preserve their existing mortgage, a traditional HELOC may be the more suitable option.

The best choice depends on your financial goals, available equity, payment preferences, and long-term plans.

What Are the Costs and Potential Disadvantages of a HECM?

Reverse mortgages are not the right solution for every homeowner.

Understanding the costs and trade-offs is just as important as understanding the benefits.

Potential considerations include:

• Closing costs, origination fees, appraisal expenses, and applicable FHA mortgage insurance premiums
• Interest and ongoing charges that generally increase the loan balance over time
• A potential reduction in remaining home equity available to heirs
• Continued responsibility for property taxes, insurance, and maintenance
• The possibility that the loan becomes due if occupancy or other obligations are not met
• Special considerations for spouses who are not borrowers
• Possible effects on eligibility for certain needs-based government benefits

There are also no HECM prepayment penalties. Borrowers may voluntarily make payments toward interest or principal, or repay the mortgage in full, subject to the loan's terms.

A reverse mortgage should be evaluated based on both its immediate benefits and its longer-term impact.

Can You Sell Your Home After Getting a Reverse Mortgage?

Yes!

A reverse mortgage does not prevent you from selling your home.

If you decide to relocate, downsize, or move closer to family, you can sell the property and use the proceeds to repay the loan.

Any remaining equity belongs to you after the mortgage payoff and applicable selling costs.

For some homeowners aged 62 and older, a separate option known as a HECM for Purchase may also help finance an eligible new primary residence without required monthly principal and interest mortgage payments.

Why Work With a Local Massachusetts Mortgage Broker?

A reverse mortgage is an important financial decision. You deserve to understand exactly how the loan works before making a commitment.

At Onshore Mortgage, LLC, we believe homeowners should receive clear explanations, straightforward answers, and personalized service.

We are based in Fairhaven, Massachusetts, and serve homeowners throughout the South Coast and other Massachusetts communities, including Dartmouth, New Bedford, Rochester, Acushnet, Westport, Mattapoisett, Marion, Wareham, Fall River, and surrounding areas.

As a local mortgage broker, our goal is to help homeowners understand their available mortgage options and determine whether a HECM reverse mortgage aligns with your financial needs.

We welcome conversations involving spouses, adult children, or trusted family members who want to better understand how a reverse mortgage may affect the home and estate.

Is a HECM Reverse Mortgage Right for You?

A reverse mortgage may be worth considering if you're at least 62 years old, have meaningful equity in your primary residence, and want to:

• Eliminate your required monthly mortgage principal and interest payment
• Remain in the home you love
• Access equity without selling your property
• Establish a potential source of future borrowing through an adjustable-rate HECM line of credit
• Improve retirement cash flow
• Reduce reliance on retirement savings for certain expenses

The decision should also account for closing costs, accrued interest, future housing plans, your spouse's circumstances, and the equity you hope to preserve for your family.

Let's Discuss Your Options

If you're a Massachusetts homeowner aged 62 or older, Onshore Mortgage can help you explore whether an FHA-insured HECM reverse mortgage makes sense for your circumstances.

We'll explain how the program works, what obligations remain, how much equity may be available, and what the loan could mean for your family.

Contact Onshore Mortgage, LLC in Fairhaven, Massachusetts, for a personalized HECM reverse mortgage consultation.

Important disclosure: HECM reverse mortgages are FHA-insured loans subject to eligibility, financial assessment, appraisal, counseling, and other program requirements. Borrowers retain title and remain responsible for property taxes, insurance, property maintenance, and applicable loan obligations. Interest and applicable charges accrue, increasing the loan balance. The loan becomes due upon certain maturity or default events, subject to applicable borrower and eligible non-borrowing spouse protections. Loan terms and proceeds vary. This article is intended for educational purposes and is not a loan commitment, financial, legal, tax, or benefits-planning advice.

*Credit and income restrictions do apply. Please visit our Disclosures page for a detailed breakdown of all loan types.