A reverse mortgage line of credit is a flexible way for homeowners age 62 and older to tap their home equity without making monthly payments. Instead of receiving a lump sum or fixed monthly checks, you get access to a pool of funds you can draw from whenever you need them. The standout feature: the unused portion of your credit line grows over time, giving you access to more money the longer you wait to use it.
This type of credit line is available through the Home Equity Conversion Mortgage (HECM) program, which is insured by the Federal Housing Administration. It’s the most common form of reverse mortgage in the United States, and the line of credit is one of several ways borrowers can choose to receive their funds.
How the Line of Credit Works
When you close on a HECM, you’re approved for a total amount called the principal limit. If you choose the line of credit option, that principal limit (minus any upfront costs rolled into the loan) becomes your available credit. You can draw from it in any amount, at any time, for any purpose, whether that’s covering medical bills, making home repairs, or supplementing retirement income.
You’re not charged interest on money sitting in the credit line. Interest only accrues on the amount you’ve actually borrowed. The loan balance, including accumulated interest, comes due when you sell the home, move out permanently, or pass away. At that point, you or your heirs repay the loan, typically by selling the property. If the home sells for less than the loan balance, FHA insurance covers the shortfall, so neither you nor your heirs owe more than the home is worth.
The Growth Feature That Sets It Apart
The most unusual aspect of a reverse mortgage line of credit is that your available balance increases over time, even if your home’s value stays flat or drops. The unused portion of the credit line grows at the same rate being charged on the loan balance. This rate, called the effective rate, combines a variable index rate, a lender’s margin set in your contract, and the 1.25% annual mortgage insurance premium.
Here’s what that looks like in practice. Say you’re approved for a $200,000 line of credit and you don’t touch it for five years. Depending on interest rates, your available credit might grow to $240,000 or more during that period, even though you haven’t borrowed a dime. The growth compounds monthly, so the longer you leave funds untouched, the more pronounced the effect becomes.
This growth doesn’t mean you’re borrowing more or that your loan balance is increasing. It simply means you have access to a larger pool of money if you need it later. Some financial planners recommend opening a HECM line of credit early in retirement and letting it grow as a safety net for unexpected expenses or market downturns that might otherwise force you to sell investments at a loss.
How Much You Can Borrow
Your initial credit line depends on three factors: the age of the youngest borrower (or eligible non-borrowing spouse), current interest rates, and your home’s appraised value. The FHA caps the maximum home value used in the calculation at $1,249,125 for 2026. If your home is worth more, the excess equity doesn’t count toward your borrowing limit.
Older borrowers qualify for a larger percentage of their home’s value. A 72-year-old will generally receive a higher initial principal limit than a 62-year-old with the same home value. Lower interest rates also increase the amount available. There’s no single formula published for borrowers to calculate this on their own, but your lender will run the numbers during the application process, and HUD-approved counselors can help you understand the results.
Costs and Fees
A HECM line of credit carries several costs that reduce the amount of equity available to you or your heirs over time.
- Upfront mortgage insurance premium: This is either 2% of your home’s appraised value (or the FHA limit, whichever is less) if you draw more than 60% of your principal limit in the first year, or 0.5% if you stay at or below that 60% threshold. Choosing the line of credit option and drawing conservatively in year one can significantly reduce this cost.
- Annual mortgage insurance premium: 1.25% of the outstanding loan balance, charged yearly and added to what you owe.
- Origination fee: Lenders can charge up to $6,000, depending on your home’s value. This is often rolled into the loan balance rather than paid out of pocket.
- Closing costs: Standard costs like appraisal fees, title insurance, and recording fees apply, similar to a traditional mortgage.
- Interest: Charged only on the amount you’ve drawn, not on the unused credit line. Most HECM lines of credit carry variable interest rates.
These costs add up over time because they compound on the loan balance. The longer you carry a balance, the more you’ll owe. That’s the trade-off for not making monthly payments.
Who Qualifies
To be eligible, you must be at least 62 years old, own the home as your primary residence, and have substantial equity in the property (most borrowers either own their home outright or have a small remaining mortgage balance). You’ll also need to attend a counseling session with a HUD-approved counselor before applying.
Unlike a traditional home equity line of credit, a HECM doesn’t require income verification or a minimum credit score. However, lenders do review your financial situation to assess whether you can keep up with property taxes, homeowners insurance, and basic maintenance. If there are concerns, the lender may set aside a portion of your loan proceeds to cover those obligations, which reduces the amount available in your credit line.
How It Differs From a HELOC
A standard home equity line of credit (HELOC) and a reverse mortgage line of credit both let you borrow against your home’s equity, but the similarities mostly end there.
With a HELOC, you make monthly payments from the start, you need a credit score of at least 620, and you must prove you have enough income to repay the loan. The lender can also freeze or reduce your credit line if your home loses value or your financial situation changes. A HELOC typically has a draw period of 10 years, after which you enter a repayment phase where monthly payments can increase substantially.
A reverse mortgage line of credit requires no monthly payments and no income or credit score threshold. The lender cannot freeze or reduce your available credit, even if housing prices drop. Once your line of credit is established, it remains available (and continues growing) regardless of market conditions. This guarantee is one of the most significant advantages for retirees who want certainty about future access to funds.
The downside is cost. HECM fees, including the upfront and annual mortgage insurance premiums, make it more expensive than a HELOC for borrowers who have the income to qualify for one. If you’re still working or have reliable retirement income, a HELOC is usually the cheaper option. The reverse mortgage line of credit is designed specifically for retirees who either can’t qualify for a HELOC or don’t want the burden of monthly payments.
What Happens When the Loan Comes Due
The loan balance becomes payable when the last surviving borrower (or eligible non-borrowing spouse) sells the home, moves to a different primary residence, or passes away. Heirs typically have about six months to settle the loan, with possible extensions up to a year. They can repay the balance and keep the home, or sell it and pocket any remaining equity after the loan is paid off.
If the home sells for less than what’s owed, the FHA insurance covers the difference. Neither you nor your heirs are responsible for the gap. This “non-recourse” protection means the debt can never exceed the home’s sale value, no matter how much you’ve borrowed or how much interest has accumulated.
You do need to stay current on property taxes and homeowners insurance, and keep the home in reasonable condition. Falling behind on these obligations can trigger a default, potentially leading to foreclosure. As long as you meet these requirements, you can stay in your home for as long as you choose.