Reverse Mortgage in Colorado Springs: How HECMs Work
A reverse mortgage in Colorado Springs lets a homeowner age 62 or older convert home equity into cash without a monthly mortgage payment. The most common type is the FHA-insured Home Equity Conversion Mortgage (HECM). You keep the title and stay in the home; the loan is repaid when the last borrower sells, moves out permanently, or passes away. You must keep paying property taxes, homeowners insurance, and upkeep.
El Paso County has one of the larger 65-and-older populations on the Front Range, and a lot of those homeowners bought decades ago when Colorado Springs prices were a fraction of today’s. That gap — low remaining balance, high current value — is exactly the situation a HECM is built for. But it’s also one of the most misunderstood products in the mortgage world, so let’s walk through how it actually works.
What is a HECM and how does it work?
A HECM is a reverse mortgage insured by the Federal Housing Administration. Instead of you paying the lender each month, the lender pays you (or sets up a line of credit), and the loan balance grows over time as interest and fees are added. You make no required monthly principal-and-interest payment for as long as you live in the home as your primary residence.
The loan becomes due and payable when a “maturity event” happens — typically when the last surviving borrower sells the home, moves out for more than 12 consecutive months (often into assisted living), or dies. At that point you or your heirs repay the balance, usually by selling the home. Anything left over after the loan is paid belongs to you or your estate.
One feature worth understanding up front: a HECM is a non-recourse loan. Neither you nor your heirs ever owe more than the home is worth at the time of repayment. If the balance grows past the value, FHA insurance covers the difference — that’s part of what the mortgage insurance premium pays for.
Who qualifies for a reverse mortgage in El Paso County?
The core eligibility rules are set by FHA, not by individual lenders. To qualify for a HECM you generally must:
- Be at least 62 years old (all borrowers on title must meet this).
- Own the home outright or have a low enough remaining balance that the HECM can pay it off at closing.
- Live in the home as your primary residence — no second homes or pure rentals.
- Have a property that meets FHA standards: single-family, a 2–4 unit where you occupy one unit, an FHA-approved condo, or many manufactured homes that meet HUD criteria.
- Stay current on property taxes, homeowners insurance, and HOA dues, and keep the home in reasonable repair.
- Complete a HUD-approved counseling session before applying — this is mandatory and exists to protect you.
Lenders also run a “financial assessment” to confirm you can realistically keep up with taxes and insurance. If there’s concern, a portion of the proceeds may be set aside (a LESA, or Life Expectancy Set-Aside) to cover those bills.
How much money can you get, and how is it paid?
The amount available — called the principal limit — depends on three things: the age of the youngest borrower, current interest rates, and the home’s appraised value (capped at the national HECM lending limit, which is in the $1.2 million range for 2025; confirm the current figure). Older borrowers and lower rates mean more available equity.
You choose how to receive the money, and you can often combine options:
| Payout option | How it works | Good fit for |
|---|---|---|
| Lump sum | Fixed-rate draw of available funds at closing | Paying off an existing mortgage or large one-time need |
| Line of credit | Draw as needed; unused portion grows over time | Flexible reserve / “rainy day” access |
| Tenure payments | Equal monthly payments for as long as you live in the home | Supplementing fixed retirement income |
| Term payments | Equal monthly payments for a set number of years | Bridging a gap until another income source starts |
| Combination | Mix of the above | Most real-world El Paso County borrowers |
The growing line of credit is the option financial planners talk about most. The unused balance grows at the loan’s rate, so the longer you leave it untouched, the more borrowing power you build — useful as a standby resource.
What does a reverse mortgage cost?
HECMs are not cheap to set up, and being honest about that matters. Expect these cost categories:
- Upfront mortgage insurance premium (MIP) paid to FHA at closing, plus an ongoing annual MIP added to the balance.
- Origination fee, capped by FHA based on home value.
- Standard closing costs — appraisal, title, recording, etc.
- Servicing and the interest that accrues on the growing balance.
Most of these can be financed into the loan rather than paid out of pocket, but financing them means a higher starting balance and faster equity erosion. Because rates, MIP, and fee caps change, ask for a full written cost breakdown and the official “Total Annual Loan Cost” (TALC) disclosure before you commit.
What are the pros and cons?
A HECM is a tool, not a one-size-fits-all answer. Here’s the honest balance sheet:
| Pros | Cons |
|---|---|
| No required monthly mortgage payment | Loan balance grows; equity shrinks over time |
| You keep the title and stay in your home | Higher upfront costs than a typical refinance |
| Non-recourse — never owe more than the home’s value | Less left for heirs to inherit |
| Proceeds generally not taxed as income (confirm with a tax advisor) | You must keep paying taxes, insurance, and upkeep or risk default |
| Flexible payout options | Moving out long-term triggers repayment |
Who does a Colorado Springs reverse mortgage actually fit?
It tends to make sense for a homeowner who plans to stay put for the long haul, has substantial equity, and wants to either eliminate an existing mortgage payment or create reliable cash flow in retirement. Picture a couple near Patty Jewett who bought in the 1990s, owe very little, and want to stop a monthly payment while keeping the house they raised kids in — that’s a textbook fit.
It fits poorly if you expect to move within a few years (the upfront costs don’t have time to pay off), if leaving maximum equity to heirs is the priority, or if you’re already stretched thin on property taxes and insurance. In those cases, a traditional refinance, a HELOC, or simply right-sizing to a smaller home may serve you better. A good broker should be willing to talk you out of a HECM when it isn’t the right call.
Frequently asked questions
Can I lose my home with a reverse mortgage?
You can if you stop meeting the loan’s obligations — primarily failing to pay property taxes or homeowners insurance, letting the home fall into serious disrepair, or moving out of the home as your primary residence for more than 12 months. As long as you keep up those responsibilities, you can live in the home without a monthly mortgage payment.
What happens to my home when I pass away?
The loan becomes due. Your heirs typically have options: sell the home and keep any remaining equity after the balance is repaid, refinance into a traditional loan to keep the home, or, because it’s non-recourse, walk away without owing more than the property’s value. FHA insurance covers any shortfall.
Do I still own my home with a HECM?
Yes. You keep the title in your name. The lender places a lien against the property — the same way any mortgage does — but you remain the owner and can sell at any time.
Is a reverse mortgage taxable income?
Reverse mortgage proceeds are generally treated as loan advances, not income, so they typically aren’t taxed and usually don’t affect Social Security or Medicare. They can, however, affect need-based programs like Medicaid. Confirm your specific situation with a tax advisor or benefits specialist.
Is counseling really required?
Yes. HUD requires every HECM applicant to complete a session with an independent, HUD-approved counselor before the loan can move forward. It’s a consumer protection — the counselor explains alternatives and costs so you can make an informed decision.
Thinking through whether a HECM fits your retirement in El Paso County? Talk with 719 Lending and we’ll walk through your equity, your goals, and every alternative — honestly — before anyone fills out an application.
719 Lending Inc., NMLS #1601989 · Equal Housing Opportunity · This article is educational only, is not a commitment to lend, and not all applicants will qualify. 719 Lending is not affiliated with or endorsed by any government agency.
