Reverse Mortgage Payment Options: Lump Sum, Monthly, Term & Tenure

The Six Ways a HECM Can Pay You

The federal statute lists the ways a borrower may receive funds. Under 12 U.S.C. § 1715z-20(d)(9), the loan must "provide for future payments to the mortgagor based on accumulated equity (minus any applicable fees and charges)," by a method the borrower selects, including a line of credit, monthly payments over a term, monthly payments over the borrower's tenure, combinations of monthly payments with a line of credit, and "any other basis that the Secretary considers appropriate." The CFPB groups these into three main options: a line of credit, a monthly payout and a lump sum. In common use, that gives six plans.

Lump sum. All available funds at once, at closing. The CFPB notes the "amount available may be lower compared to other payment options." It trades flexibility for having the money in hand.

Tenure. Fixed monthly payments, which the CFPB describes as lasting "as long as you maintain the reverse mortgage and the payout does not cause the balance to exceed the amount stated in the mortgage." It trades a larger reserve for a steady amount.

Term. Fixed monthly payments "for a set number of years," chosen by the borrower. Payments are typically larger than tenure payments because they stop sooner.

Line of credit. Money drawn only when needed. The CFPB explains that "whatever you don't use in your credit line will keep growing." This trades a predictable monthly amount for flexibility.

Modified tenure. Tenure payments combined with a line of credit.

Modified term. Term payments combined with a line of credit.

Interest rate type matters too. The statute allows a "fixed or variable interest rate," and the lender discloses which rate types are offered with which plan. Plans can usually change later: under 12 U.S.C. § 1715z-20(d)(10), the borrower may convert to another method during the loan, "except that in the case of a fixed rate mortgage, the Secretary may, by regulation, limit such convertibility." None of these plans suits every household. Each fits some situations and not others.

How the Principal Limit Shapes What Is Available

Before any plan matters, a family wants to know how much is in the pool. That pool is the "principal limit," which the CFPB describes as the borrowing limit. It takes into account age, the interest rate and the home's value.

The CFPB explains that "loans with older borrowers, higher-priced homes, and lower interest rates will have higher principal limits" than loans with younger borrowers, lower-priced homes and higher rates. For a married couple or co-borrowers, the limit is based on the age of the youngest co-borrower or Eligible Non-Borrowing Spouse. HUD also publishes the factors lenders use to turn these inputs into a figure.

Home value counts only up to a cap, called the maximum claim amount. HUD's Mortgagee Letter 2025-22 sets it at $1,249,125 for FHA case numbers assigned from January 1, 2026, through December 31, 2026. HUD updates this figure, so the current number comes from HUD.

Some of the principal limit is spoken for at closing. The CFPB explains that a borrower with an existing mortgage "must be able to pay it off when you close," using personal funds or money from the reverse mortgage. Financed closing costs reduce what remains, too. Federal rules limit the origination fee, the lender discloses it, and the statute says it "may be fully financed with the mortgage." A lender and a counselor can also explain any limits on how much may be drawn early in the loan. How an existing balance fits in is covered further in retiring with a mortgage still owed.

For the line of credit, the unused portion grows over time, so more may become available to draw later, up to the maximum stated in the mortgage. That growth is not cash in the bank. It is borrowing room, and anything drawn adds to the balance.

What Happens to the Balance Over Time

A family weighing these plans often asks whether the debt will shrink the way a regular mortgage does. It will not. The CFPB states that "interest and fees are added to the loan balance each month and the balance grows."

No monthly loan payment is required while the borrower keeps the loan's terms, which continue for the life of the loan (see the obligations section below).

The CFPB states that a HECM must be paid off when the last surviving borrower or Eligible Non-Borrowing Spouse dies, sells the home, or no longer lives there as a principal residence. The loan may come due sooner if the home stops being the principal residence, taxes or insurance go unpaid, or the home is not kept in good repair.

The payment plan changes how fast the balance builds. With a lump sum, interest is charged on the full amount from the start. With monthly payments or a line of credit, interest is charged only on what has actually been paid out. A hypothetical illustration: two borrowers with the same principal limit, one taking it all at closing and one drawing small amounts over years, would owe different balances later, because the second has borrowed less for most of that time.

When the loan comes due, the home is often sold to repay it. Heirs may instead pay off the loan and keep the house. The statute provides that the homeowner is not liable for any shortfall between the balance and the net sale proceeds or the FHA insurance benefit, 12 U.S.C. § 1715z-20(d)(7). The CFPB puts it plainly: "neither you nor your heirs will have to pay back more than your home is worth."

Which Payment Option Fits Your Situation?

Rather than one answer, a few questions can frame the choice for a family.

Is there a large bill to clear now? A lump sum may fit when the money is needed at once, such as paying off an existing mortgage or a large debt at closing.

Is the gap a monthly one? Tenure or term payments may fit when a fixed income falls short each month. Tenure stretches a smaller amount out; term pays more for a set period.

Is the need uncertain or later? A line of credit may fit when the goal is a reserve for repairs, care or emergencies. Unused credit grows, so the amount available can increase over time if it is not drawn.

Is it both? A modified plan pairs a regular monthly amount with a reserve for the unexpected.

How long will the home be lived in? The CFPB warns that if a health issue or another event may cause a move soon, "a reverse mortgage is an expensive way to cover short term cash needs." A HELOC, a home equity loan, refinancing, downsizing or local tax relief may be weighed instead. The tradeoffs are laid out in reverse mortgage vs HELOC.

Counseling is part of the process. The statute requires the borrower to have "received adequate counseling" from an independent third party before the loan can be insured, 12 U.S.C. § 1715z-20(d)(2)(B). That session is a natural time to ask about payment plans. HUD's HECM program page explains how to search the HECM Counselor Roster or call (800) 569-4287. And as noted above, the plan can generally be changed later, subject to the fixed-rate limit.

Your Obligations Stay the Same Under Every Plan

These duties are the same under every plan, which is some comfort: no single choice carries a special trap.

The youngest borrower must be 62 or older at closing, 24 C.F.R. § 206.33. The home must be "the principal residence of each borrower, and if applicable, Eligible Non-Borrowing Spouse, at closing," 24 C.F.R. § 206.39. After closing and for the life of the loan, the borrower keeps living there as a principal residence, pays property taxes and homeowners insurance, and keeps the home in good repair.

Falling behind on these duties is a default, not a penalty tied to a payment plan. The CFPB's caution guide notes a borrower "could face foreclosure if you run out of money to pay property taxes, insurance, or other housing-related expenses." A borrower who falls behind can contact the loan servicer or a HUD-approved housing counselor about what options exist.

A spouse who is not on the loan may be able to stay. The CFPB explains that for HECMs with FHA case numbers assigned on or after August 4, 2014, an Eligible Non-Borrowing Spouse must have been identified in the loan documents and have lived in the home at closing, among other conditions HUD sets, and will not receive money from the loan. A surviving spouse's wider choices are discussed in home equity options for a surviving spouse.