Reverse mortgage monthly payments work differently from payments on a traditional mortgage, HELOC, or cash-out refinance. With an FHA-insured Home Equity Conversion Mortgage, or HECM, the homeowner generally does not have to make scheduled monthly principal and interest payments while the loan requirements continue to be met.
That does not mean the home is free or that every housing expense disappears. Property taxes, homeowners insurance, maintenance, applicable association charges, and principal-residence requirements still matter. Interest and fees are generally added to the loan balance over time.
A HECM generally does not require scheduled monthly principal and interest payments. The homeowner remains responsible for property taxes, homeowners insurance, required flood insurance, maintenance, applicable HOA or condominium dues, and continued use of the home as a principal residence.
| Payment feature | HECM reverse mortgage | HELOC | Cash-out refinance |
|---|---|---|---|
| Scheduled monthly principal and interest | Generally not required while loan obligations are met. | Required after funds are borrowed. | Required each month. |
| Rate and payment behavior | Interest accrues to the balance. Fixed and adjustable HECM structures may be available. | Usually variable, so the required payment can change. | Often fixed, although adjustable options may exist. |
| Property taxes and insurance | Still required. | Still required. | Still required, often collected through escrow. |
| Typical balance direction without extra payments | Generally increases as interest and fees accrue. | Depends on draws and payments. | Generally decreases with scheduled amortizing payments. |
The Consumer Financial Protection Bureau’s reverse-mortgage overview explains that borrowers generally do not make monthly mortgage payments, while interest and fees are added to the balance.
How much could your required monthly payment change?
I can compare a HECM, HELOC, and traditional refinance using your home value, current mortgage balance, income profile, and retirement cash-flow goals.
A HECM generally does not require a scheduled monthly principal and interest payment. That is the portion of a traditional mortgage payment that pays interest and gradually reduces principal.
Instead, interest, FHA mortgage insurance, and applicable financed charges are generally added to the reverse-mortgage balance. This can create meaningful cash-flow relief for a homeowner who is currently making a substantial mortgage payment.
The phrase “no monthly mortgage payment” can be misleading when it is not explained. A HECM removes the scheduled principal-and-interest requirement, but it does not eliminate the costs and responsibilities of owning the property.
The homeowner must continue meeting the HECM loan requirements. The CFPB identifies three core responsibilities: pay property charges on time, keep the home in good repair, and use it as the principal residence.
Depending on the property, continuing expenses may include:
Failure to meet these obligations can cause the loan to become due and may place the home at risk of foreclosure. Read the CFPB’s HECM borrower-responsibility guidance for the federal consumer explanation.
An existing mortgage generally must be paid off when the HECM closes. Available HECM proceeds may be used for that payoff. When the proceeds are insufficient, the homeowner may need another permitted source of funds to complete the transaction.
This payoff can be the biggest source of monthly cash-flow improvement. For example, eliminating an existing $1,600 monthly principal-and-interest payment may matter more to a retiree than comparing two advertised interest rates in isolation.
The current mortgage balance also reduces the HECM proceeds available for home improvements, reserves, a line of credit, or other permitted uses.
When the homeowner does not make voluntary payments, the HECM balance generally increases as borrowed funds, interest, FHA mortgage insurance, and financed charges accumulate.
A simplified monthly relationship looks like this:
Beginning balance + new advances + accrued interest + applicable mortgage insurance and fees – voluntary payments = new balance.
As the loan balance rises, the homeowner’s equity may decline unless home appreciation and voluntary repayments offset that growth. This is why a responsible analysis should include both today’s payment relief and a longer-term balance projection.
My guide to reverse mortgage costs in Colorado explains the upfront and ongoing charges in more detail.
Yes. A HECM borrower may generally make voluntary payments without a prepayment penalty. The absence of a required scheduled principal-and-interest payment does not prevent the homeowner from paying interest, reducing principal, or repaying the loan entirely.
Some homeowners choose to pay the accrued interest periodically to slow balance growth. Others preserve cash because their main objective is reducing required monthly expenses. The right choice depends on income, liquidity, tax considerations, estate goals, and the broader financial plan.
Consider a 68-year-old Colorado homeowner with a home worth approximately $725,000, an existing mortgage balance of $175,000, and a goal of accessing another $75,000 for improvements and reserves.
Assume the homeowner’s current principal-and-interest payment is $1,500 per month. Compare three possible structures:
| Option | Potential cash-flow effect | Main tradeoff |
|---|---|---|
| HELOC | Keeps the existing $1,500 payment and adds a payment on borrowed HELOC funds. | Potentially lower upfront cost, but greater required monthly outflow and variable-rate risk. |
| Cash-out refinance | Replaces the existing mortgage with a larger amortizing loan and a new required payment. | Predictable repayment may be attractive, but the entire first-mortgage balance is repriced. |
| HECM | May pay off the existing mortgage and remove the scheduled $1,500 principal-and-interest payment if sufficient proceeds are available. | Higher upfront costs may apply, and the balance generally grows without voluntary payments. |
This is an illustration, not a quote. Available proceeds and actual payments depend on age, rates, home value, existing liens, credit, income, property charges, lender terms, and program requirements.
When I work through reverse mortgage monthly payments with a Colorado homeowner, I begin with the household budget, not the product name.
I usually compare:
A HELOC may be a better fit for someone with strong income, a short borrowing period, and a plan to repay quickly. A HECM may deserve more consideration when reducing required monthly expenses is the primary goal and the homeowner expects to remain in the property.
For the full decision framework, read Reverse Mortgage vs. HELOC for Colorado Homeowners 62+. Qualification is also different, as explained in my HELOC vs. HECM qualification comparison.
No. Scheduled monthly principal and interest payments are generally not required, but the homeowner must continue paying taxes, insurance, maintenance, applicable association charges, and other property expenses.
Yes. Even without a required scheduled principal-and-interest payment, the servicer provides account information showing the balance, advances, interest, fees, available line-of-credit funds when applicable, and other activity.
A homeowner can generally make voluntary partial payments, including an amount intended to offset accrued interest. The servicer can explain how payments are applied under the loan documents.
The loan may become due and payable, and the home may be at risk of foreclosure. Some borrowers are required to have part of their HECM proceeds set aside for future property charges following the lender’s financial assessment.
The balance generally becomes due after the last borrower and any protected eligible non-borrowing spouse no longer occupies the home. Heirs may have options to sell or keep the property. Read what happens to a reverse mortgage when the homeowner dies.
See the HECM, HELOC, and refinance numbers for your home side by side.
I can compare the required monthly payment, estimated proceeds, upfront costs, projected balance, and long-term tradeoffs using your actual home value, mortgage balance, and retirement goals.
For a complete 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 and property 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.
