One of the first questions I hear from Colorado homeowners considering a reverse mortgage is simple: “Will I still have a monthly mortgage payment?”
With a Home Equity Conversion Mortgage, or HECM, the answer is different from a traditional mortgage, HELOC, or cash-out refinance. A HECM generally does not require scheduled monthly principal and interest payments as long as the loan requirements continue to be met.
That does not mean the home is “free” or that there are no ongoing obligations. Understanding that distinction is one of the most important parts of deciding whether a reverse mortgage fits your retirement plan.
With a traditional mortgage, cash-out refinance, or HELOC, the borrower normally receives a monthly bill and must make the required payment. A HECM works differently. Interest, mortgage insurance, and applicable financed charges are added to the loan balance over time instead of requiring a scheduled monthly principal and interest payment.
This can materially change retirement cash flow, especially for a homeowner who still has a mortgage payment today.
For a broader side-by-side comparison, see my Reverse Mortgage vs. HELOC for Colorado Homeowners 62+ guide.
A HECM does not eliminate the normal responsibilities of owning a home. Borrowers must continue to meet loan requirements, including paying property charges and maintaining the property.
Failure to meet those obligations can cause the loan to become due and payable. The Consumer Financial Protection Bureau also emphasizes that the homeowner keeps title to the home but must continue paying taxes, insurance, and required property expenses.
If there is an existing mortgage, it generally must be paid off as part of the HECM transaction. HECM proceeds may be used for that payoff if enough proceeds are available.
This is why I do not evaluate a reverse mortgage by looking at the interest rate alone. If a homeowner is currently making a significant first-mortgage payment, paying that loan off through a HECM may change required monthly cash flow even though the reverse-mortgage balance can grow over time.
When I compare options for a Colorado homeowner, I usually start with five numbers:
Then I compare the required monthly payment under a HELOC or refinance with the HECM structure, while also looking at costs, available proceeds, expected time in the home, and the impact on remaining equity.
For example, consider a 68-year-old Colorado homeowner with a home worth about $725,000, an existing mortgage balance of $175,000, and a goal of accessing another $75,000 to $100,000. If that homeowner expects to remain in the house for many years and is more concerned about monthly cash flow than maximizing future equity, the payment structure deserves at least as much attention as the rate.
If the same homeowner has strong retirement income, wants the money only for a short-term project, and expects to repay the balance quickly, a HELOC may deserve more consideration.
Yes. The fact that scheduled monthly principal and interest payments are not required does not prevent a borrower from making voluntary payments. Some homeowners choose to make payments periodically to slow the growth of the balance. Others choose not to because their objective is preserving monthly cash flow.
The right approach depends on the household’s broader financial plan.
A HECM can have higher upfront costs than a typical HELOC, and the loan balance generally grows when the borrower does not make voluntary payments. A HELOC may cost less to establish but normally comes with a required payment and often a variable rate. A cash-out refinance may provide predictable financing but replaces the current first mortgage with a new one.
That is why I prefer to compare all three structures instead of assuming one product is automatically better.
Want to see the payment difference using your home and mortgage balance?
I can compare a HECM, HELOC, and traditional refinance side by side so you can see the required monthly payment, estimated access to equity, and major tradeoffs before deciding what deserves further consideration.
For the full reverse-mortgage program overview, visit Reverse Mortgages in Colorado.
This article is for general educational purposes and is not financial, tax, legal, or estate-planning advice. HECM borrowers must complete HUD-approved counseling and meet applicable program requirements.
Milestone Home Mortgage LLC NMLS #2588937. Michael Shotnik NMLS: 218281, CO License: 100017466. Not licensed in Alaska or New York. To check license status of mortgage loan originator, visit D.O.R.A. and NMLS consumer access.
