By Chris Freck, CRMP, NMLS #241125. Updated September 4, 2026. This comparison is educational and is not legal, tax, or financial-planning advice.
A Home Equity Agreement and a reverse mortgage can both allow homeowners to access home equity without a traditional monthly loan payment, but they are fundamentally different financial products.
That distinction matters.
A Home Equity Agreement—also called a home equity investment, home equity contract, or shared-equity agreement—generally provides an upfront payment in exchange for a contractually determined share of the home’s future value or a future settlement amount.
A Home Equity Conversion Mortgage, or HECM, is an actual reverse mortgage loan insured by the Federal Housing Administration and generally available to eligible homeowners age 62 or older.
The two products should not be treated as interchangeable.
Quick Answer: Is an HEA Loan a Reverse Mortgage?
No.
An HEA is generally structured as a home equity contract rather than an FHA-insured reverse mortgage.
The Consumer Financial Protection Bureau describes these arrangements as contracts in which a homeowner receives money upfront and later owes a lump-sum settlement based partly on the home’s value. They are also marketed under terms such as Home Equity Agreement, Home Equity Investment, and shared-equity agreement.
A HECM reverse mortgage, on the other hand, is an FHA-insured reverse mortgage available through FHA-approved lenders. HUD identifies the HECM as the federal government’s insured reverse mortgage program.
That difference affects:
- Eligibility
- Costs
- Repayment
- Mortgage insurance
- Borrower protections
- Spousal protections
- Counseling
- How much equity you may ultimately retain
What Is a Home Equity Agreement?
A Home Equity Agreement (HEA) allows a homeowner to receive money today in exchange for agreeing to a future payment tied to the value of the property.
The homeowner generally does not make monthly payments to the HEA company.
Instead, the agreement is settled later—commonly when:
- The homeowner sells the property
- The homeowner buys out the agreement
- A triggering event occurs
- The contract reaches the end of its term
HEA contracts can vary substantially from one provider to another.
According to the CFPB, contract terms commonly run approximately 10 to 30 years, and the final amount owed can depend on factors such as the property’s future value, the company’s contractual share or multiplier, fees, and other provisions.
An HEA Is Not “Free Equity”
The absence of a monthly payment does not mean there is no cost.
The CFPB found that home equity contracts can be significantly more costly than traditional home-secured financing in some circumstances. Under some contracts, the settlement amount can grow quickly because of the valuation method, starting-value adjustment, multiplier, and contract cap.
The exact result depends on the specific agreement and future property value.
It means homeowners need to examine the actual settlement formula instead of focusing only on the absence of monthly payments.
What Is a HECM Reverse Mortgage?
A Home Equity Conversion Mortgage (HECM) is the most common type of reverse mortgage in the United States.
It is insured by the Federal Housing Administration.
HECMs are generally available to qualifying homeowners age 62 or older who meet FHA requirements.
With a HECM:
- The homeowner retains title to the property.
- Required monthly principal-and-interest mortgage payments generally are not required.
- Interest and applicable charges are added to the loan balance.
- The homeowner must continue paying property taxes and homeowners insurance.
- The homeowner must maintain the property.
- The home generally must remain the borrower’s principal residence.
CFPB confirms that the reverse mortgage balance normally grows over time because interest and fees are added to the amount owed.
A HECM is therefore not free money. It is a loan secured by the home.
HEA vs. HECM: Side-by-Side Comparison
| Feature | Home Equity Agreement | HECM Reverse Mortgage |
|---|---|---|
| Product type | Home equity contract / investment structure | Mortgage loan |
| FHA insured | No, generally not | Yes |
| Minimum age | Depends on provider | Generally 62+ |
| Monthly payment to provider/lender | Generally none | No required monthly principal and interest payment |
| Interest | Usually not structured as traditional interest | Interest accrues on loan balance |
| Mortgage insurance | No FHA HECM MIP | FHA mortgage insurance applies |
| Repayment | Usually settlement at sale, buyout, end of term, or triggering event | Generally due after sale, death, permanent move, or other qualifying event |
| HUD counseling | Not part of the standard HECM counseling framework | Required for HECM |
| Credit requirements | Provider-specific | FHA financial assessment applies |
| Property taxes and insurance | Homeowner remains responsible | Homeowner remains responsible |
| Federal HECM protections | No | Yes |
| Contract maturity | Often fixed term | Generally tied to occupancy and qualifying due-and-payable events |
Does a 620 Credit Score Eliminate Reverse Mortgage Insurance?
No.
This is an important misconception.
A 620 credit score does not trigger an FHA HECM mortgage-insurance waiver.
FHA HECM mortgage insurance is required under the applicable program rules and is not waived because a borrower has a particular credit score.
How Credit Actually Matters With a HECM
HECM underwriting uses a financial assessment.
The lender evaluates factors that can include:
- Credit history
- Property-charge payment history
- Income
- Monthly expenses
- Residual income
- The borrower’s ability to continue paying property taxes and insurance
HUD’s financial-assessment guidance specifically requires lenders to evaluate credit history and residual income rather than using the proposed 620-score MIP-waiver system described in some online content.
HECM Mortgage Insurance vs. HEA Costs
This is where homeowners need to compare the products carefully.
HECM Costs
A HECM may include:
- FHA upfront mortgage insurance
- Annual mortgage insurance added to the balance
- Interest
- Origination charges
- Appraisal costs
- Title and settlement expenses
- Other permissible closing costs
HECMs require initial and ongoing FHA mortgage insurance. The actual charges and their effect on the growing loan balance must be disclosed for the specific transaction.
The annual MIP should not be confused with a normal property-tax or homeowners-insurance escrow account.
HEA Costs
An HEA generally does not have FHA HECM mortgage insurance because it is not an FHA HECM.
Instead, potential costs may come from:
- Transaction or processing fees
- Appraisal or valuation charges
- The company’s contractual share of future value
- Appreciation-sharing formulas
- Multipliers
- Early-settlement provisions
- Contractual caps
- Other contract-specific expenses
The final cost can therefore be much harder to predict.
CFPB specifically warns that HEA/home-equity-contract disclosures are not standardized across the industry and that repayment calculations can differ substantially between companies.
How Much Can You Get From a HECM in 2026?
A HECM’s Maximum Claim Amount is not the same thing as the amount of cash a borrower will receive.
For calendar year 2026, FHA increased the nationwide HECM Maximum Claim Amount to:
$1,249,125
The limit applies to FHA case numbers assigned on or after January 1, 2026 and applies nationwide, including special exception areas.
This does not mean a homeowner can automatically borrow $1,249,125.
The actual HECM principal limit depends on factors including:
- Age of the youngest borrower or applicable eligible non-borrowing spouse
- Current FHA program inputs
- The applicable Maximum Claim Amount
- Property value
- Existing mortgage obligations
- FHA calculations and program requirements
HUD confirms that principal-limit calculations use multiple borrower, property, and FHA program inputs.
Actual proceeds are transaction-specific and may be substantially lower than the maximum claim amount.
How HEA Funding Is Calculated
HEAs do not use FHA HECM principal-limit factors.
Each provider establishes its own underwriting, valuation, and settlement system.
Factors may include:
- Property value
- Existing mortgage balance
- Available equity
- Property location
- Property type
- Requested amount
- Credit or financial profile
- Provider investment guidelines
- Contract term
The company then determines what percentage or formula will be used to calculate the eventual settlement.
Because HEA providers do not all use the same formula, comparing only the initial cash received can be misleading.
A homeowner should also calculate what may be owed after:
- 3 years
- 5 years
- 10 years
- The full contract term
What Happens When the Home Appreciates?
This is one of the most important differences between HEAs and reverse mortgages.
With an HEA
If the home’s value increases significantly, the amount owed to the HEA company may also increase substantially depending on the contract.
That means strong home-price appreciation can increase the homeowner’s settlement cost.
With a HECM
The lender does not receive a contractual percentage of home appreciation simply because the property’s value increases.
Instead, the HECM balance grows primarily because of:
- Amounts borrowed
- Accrued interest
- Mortgage insurance
- Applicable financed fees
If the home’s value exceeds the loan balance when the property is eventually sold, the remaining equity belongs to the homeowner or estate after satisfying the mortgage and transaction costs.
Do You Still Own Your Home?
With a HECM
Yes.
The homeowner retains title.
CFPB explains that although the home secures the reverse mortgage just like it secures a traditional mortgage, title remains in the homeowner’s name.
With an HEA
The homeowner generally retains ownership and occupancy rights, but the HEA company obtains contractual rights connected to the property’s value and commonly secures its interest through a lien.
CFPB warns that the lien associated with a home equity contract can potentially make refinancing or obtaining additional financing more difficult.
Can a Home Equity Agreement Affect Refinancing?
Potentially, yes.
Many HEA arrangements create a lien or other secured interest against the property.
If the homeowner later wants to refinance the existing mortgage, the new lender may require the HEA company to:
- Be paid off
- Agree to subordinate its interest
- Meet the new lender’s lien-position requirements
This can create complications that should be understood before entering the agreement.
What Happens to a Non-Borrowing Spouse With a HECM?
HECM protections for a non-borrowing spouse are more complicated than simply saying:
“The spouse cannot be foreclosed on.”
An Eligible Non-Borrowing Spouse may be able to remain in the home after the borrowing spouse dies or, in certain situations, moves into a healthcare facility, but HUD eligibility conditions must be satisfied.
For example, applicable requirements can involve:
- Being married to the borrower when the HECM originated
- Being properly identified in the HECM documents
- Occupying the home as a principal residence
- Continuing to meet applicable loan obligations
CFPB specifically cautions that some non-borrowing spouses may remain in the home under HUD rules, while spouses who do not meet the requirements may not receive the same protection.
An Eligible Non-Borrowing Spouse also does not continue receiving HECM loan proceeds after the borrowing spouse dies.
Do HEAs Have the Same Spousal Protections?
Not automatically.
An HEA is not governed by the FHA HECM Eligible Non-Borrowing Spouse framework.
Rights after death, divorce, title transfer, or another major life event depend on:
- The individual HEA contract
- Ownership structure
- State law
- Estate-planning documents
- Provider requirements
Homeowners with a spouse or other person living in the property should review these provisions before entering an agreement.
What Happens to a HECM When the Borrower Dies?
When the applicable HECM becomes due after the borrower dies, heirs generally have several options.
They may:
- Sell the property
- Repay the HECM balance
- Obtain financing to retain the home
- Follow the servicer’s process for satisfying the debt
HECMs also have an important non-recourse feature.
If the balance exceeds the property’s value, FHA mortgage insurance can provide important protection.
CFPB explains that heirs may generally satisfy an underwater HECM by paying the lesser of the loan balance or 95% of the property’s appraised value, subject to applicable HUD and servicing rules.
Are Reverse Mortgage Proceeds Taxable?
The IRS states that reverse mortgage payments are generally loan proceeds rather than taxable income.
Therefore, reverse mortgage proceeds themselves generally are not treated as taxable income.
However, that does not mean every financial consequence involving a reverse mortgage—or an HEA—is automatically tax-free.
Homeowners should consult an appropriate tax professional when the decision could affect:
- Taxes
- Means-tested benefits
- Estate planning
- Capital gains
- Other financial programs
HEA vs. HECM: Which One Is Better?
There is no universal answer.
The better option depends on the homeowner’s:
- Age
- Property value
- Existing mortgage
- Available equity
- Income
- Credit profile
- Retirement strategy
- Expected length of time in the home
- Estate goals
- Ability to pay taxes and insurance
- Need for liquidity
- Expected future home appreciation
- Exit strategy
An HEA May Be Worth Comparing When:
A homeowner:
- Is younger than 62
- Wants to avoid a new required monthly provider payment
- Has enough equity
- Cannot or does not want to use conventional home-equity financing
- Understands the future settlement formula
- Has a realistic plan for eventually settling the agreement
But the future settlement cost must be analyzed carefully.
A HECM May Be Worth Evaluating When:
A homeowner:
- Is generally 62 or older
- Has substantial home equity
- Plans to remain in the property
- Wants to eliminate required monthly principal-and-interest mortgage payments
- Can continue paying property taxes, insurance, and maintenance
- Wants access to FHA’s HECM framework and protections
- Understands that the mortgage balance will generally increase over time
A HECM still requires careful financial planning.
Don’t Compare Only the Monthly Payment
This is perhaps the most important takeaway.
Both products can be marketed around the phrase:
“No monthly payments.”
But that tells you very little about the actual long-term cost.
Instead, compare:
1. Cash Received Today
How much usable money will you actually receive after closing costs?
2. Cost After Five Years
What would it cost to exit each option after five years?
3. Cost After Ten Years
What happens if the home appreciates substantially?
4. Long-Term Equity
How much estimated equity remains under different home-price scenarios?
5. Exit Strategy
How will the agreement or loan eventually be repaid?
6. Spouse and Heir Impact
What happens if the homeowner dies before the arrangement ends?
7. Refinancing Flexibility
Will the product make refinancing or obtaining another mortgage more difficult?
That comparison provides far more useful information than simply asking which option has the lowest upfront fee.
Other Home Equity Options Worth Comparing
An HEA and HECM are not the only ways to access home equity.
Depending on the homeowner’s situation, alternatives may include:
- Home Equity Line of Credit (HELOC)
- Home equity loan
- Cash-out refinance
- Selling and downsizing
- Selling and purchasing another home
- HECM for Purchase for eligible homeowners
- Proprietary reverse mortgage
- Other retirement-income strategies
Each option has different qualification standards, costs, risks, monthly-payment requirements, and long-term consequences.
Questions to Ask Before Signing an HEA
Before signing a Home Equity Agreement, ask:
- Exactly how is my settlement amount calculated?
- What happens if my home appreciates 3%, 5%, or 8% annually?
- What happens if my home loses value?
- Are there transaction or processing fees?
- Is there a minimum settlement amount?
- Is there a maximum settlement amount?
- What is the effective annualized cost under several scenarios?
- Can I buy out the agreement early?
- What happens if I refinance?
- What happens if I move?
- What happens if I die?
- How will renovations affect the final valuation?
- Is there a lien against the home?
- What happens at the end of the contract term?
- Could I be forced to sell if I cannot settle the agreement?
Do not rely only on the amount of cash advertised upfront.
Questions to Ask Before Getting a HECM
Before choosing a HECM, understand:
- Your estimated principal limit
- Current FHA program inputs
- Upfront mortgage insurance
- Ongoing mortgage insurance
- Origination and closing costs
- Existing mortgage payoff requirements
- Available payout options
- First-year disbursement restrictions
- Property-tax and insurance obligations
- Financial-assessment requirements
- Non-borrowing spouse treatment
- How the loan affects heirs
- How much equity may remain under different scenarios
HUD-approved HECM counseling is required before obtaining an FHA-insured HECM.
Frequently Asked Questions
Is an HEA loan the same as a reverse mortgage?
No. A Home Equity Agreement is generally a home equity contract in which a company provides cash in exchange for a contractually calculated future settlement. A HECM is an FHA-insured reverse mortgage loan.
Is an HEA FHA insured?
Generally, no. FHA insurance applies to qualifying Home Equity Conversion Mortgages, not ordinary Home Equity Agreements.
Do you have to be 62 to get an HEA?
Not necessarily. HEA eligibility is determined by the individual provider and applicable law. The 62-year age requirement applies to FHA HECMs.
Does a 620 credit score waive HECM mortgage insurance?
No. FHA HECM mortgage insurance is not waived because a borrower has a 620 credit score. HECMs require initial and ongoing FHA mortgage insurance under the applicable program rules.
What is the HECM limit for 2026?
The FHA HECM Maximum Claim Amount for calendar year 2026 is $1,249,125 for applicable case numbers assigned on or after January 1, 2026. Actual available proceeds are usually substantially different because they depend on borrower age, property value, existing obligations, and FHA principal-limit calculations.
Does a HECM require monthly mortgage payments?
HECM borrowers generally do not have required monthly principal-and-interest mortgage payments. However, they must continue meeting obligations such as property taxes, homeowners insurance, maintaining the home, and principal-residence requirements.
Can a non-borrowing spouse stay in the home?
Possibly. An eligible non-borrowing spouse may receive certain protections under HUD rules, but eligibility requirements must be satisfied. The protection should not be treated as automatic.
Which costs less: an HEA or a reverse mortgage?
It depends on the specific transaction.
A HECM has interest, FHA mortgage insurance, and closing costs. An HEA may have fees plus a settlement amount connected to the property’s future value.
Because HEA repayment formulas can vary dramatically, homeowners should compare several future-value scenarios rather than only upfront costs.
Authoritative Sources
- CFPB: Home Equity Contracts Market Overview
- California DFPI: Understanding Home Equity Investments
- HUD: FHA Reverse Mortgage for Seniors
- CFPB: Reverse mortgage borrower responsibilities
Bottom Line
A Home Equity Agreement is not simply a reverse mortgage without mortgage insurance.
The products work differently.
An HEA exchanges access to equity today for a contractual future settlement tied to the home.
A HECM is an FHA-insured reverse mortgage with federally established eligibility rules, mortgage insurance, mandatory counseling, financial assessment requirements, borrower responsibilities, and protections.
For homeowners age 62 and older, the right question is therefore not:
“Which option gives me the most cash today?”
A better question is:
“Which option leaves me in the strongest financial position five, ten, or twenty years from now?”
Before committing significant home equity, compare the costs, repayment terms, effects on heirs, property obligations, refinancing implications, and exit strategy.
Always speak with an appropriate licensed mortgage professional, HUD-approved HECM counselor, tax professional, financial advisor, or attorney when those areas are relevant to your decision.
To compare these options for your circumstances, review our California HEA guide and contact EstaR Mortgage. Required HUD counseling remains independent of any lender discussion.