HECM Payment Plan Options 2026: Tenure, Term, Line of Credit & Modified Plans

Choosing the right HECM payment plan is one of the most consequential financial decisions a senior homeowner makes. Each of the five plans determines how and when you access your home equity, with implications for monthly cash flow, long-term financial security, and estate planning. The U.S. Department of Housing and Urban Development requires all HECM applicants to complete counseling with a HUD-approved agency before selecting a plan, ensuring borrowers understand the trade-offs.

Mo Abdel, a wholesale mortgage broker licensed in California and Washington, has guided hundreds of seniors through HECM plan selection with access to 200+ wholesale lenders. Each lender offers different margins and rate structures, which directly affect the principal limit and monthly payment amounts under any plan.

Three facts every HECM borrower should know: (1) adjustable-rate HECMs offer all five payment plans while fixed-rate HECMs only offer the lump sum; (2) you can change your payment plan after closing for approximately $20; and (3) the line of credit growth feature causes your available funds to increase over time, even when your home value does not.

How Does the HECM Tenure Payment Plan Work?

The tenure plan delivers fixed monthly payments for as long as you live in the home as your primary residence. Even if the total payments exceed your home's value, the payments continue — this is the FHA insurance protection built into every HECM loan. The tenure plan is the closest thing to a personal pension backed by your home equity.

Payment amounts are calculated using actuarial tables that factor in the borrower's age, expected interest rate, and initial principal limit. A 72-year-old borrower with a $300,000 principal limit receives larger monthly tenure payments than a 62-year-old with the same principal limit because the expected payout period is shorter. For couples, the calculation uses the younger borrower's age, which results in smaller payments but protects both spouses.

In my experience working with retirees across California and Washington, the tenure plan works exceptionally well for seniors whose primary concern is outliving their savings. One client in Irvine, age 74, selected tenure payments to supplement her Social Security by approximately $1,400 per month. Five years later, she continues receiving the same payment with no worry about the funds running out.

How Does the HECM Term Payment Plan Work?

The term plan provides fixed monthly payments for a period you select — commonly 5, 10, 15, or 20 years. Because the payments are compressed into a shorter window, monthly amounts are significantly higher than tenure payments on the same principal limit. After the term expires, payments stop, but you retain the right to live in the home without making mortgage payments as long as you meet the loan obligations.

The term plan is strategically valuable for seniors who need higher income during a specific window. A common scenario involves a borrower who retires at 62 but cannot collect full Social Security until age 67 or begins required minimum distributions from retirement accounts at 73. The term plan bridges that gap with higher monthly payments, then stops when the other income source begins. This approach prevents the borrower from drawing down investment accounts during a market downturn.

How Does the HECM Line of Credit Plan Work?

The line of credit plan gives borrowers access to their principal limit on an as-needed basis. You draw funds when you want them, in the amounts you choose, and you pay interest only on what you have actually drawn. The defining feature of the HECM line of credit is the growth feature: your unused credit grows at a rate equal to your current interest rate plus the annual mortgage insurance premium.

This growth rate is powerful over time. If your initial available line of credit is $200,000 and the growth rate is 7.0% (for example, a 6.5% interest rate plus 0.5% MIP), your available credit grows to approximately $214,000 after one year, $229,000 after two years, and $394,000 after ten years — all without any change in your home's value. The Consumer Financial Protection Bureau has noted that the line of credit growth feature is unique to HECM reverse mortgages and unavailable in any other financial product.

Many financial planners now recommend the HECM line of credit as a longevity hedge. Establishing the credit line early in retirement, even without immediate need, allows the available balance to grow substantially by the time expenses increase in later years. A client in Newport Beach opened a $250,000 line of credit at age 63. By age 73, the available balance had grown to over $490,000, providing significant financial security without having drawn a single dollar.

What Are the Modified Tenure and Modified Term HECM Plans?

The modified plans combine monthly payments with a line of credit, offering both income predictability and flexibility. In a modified tenure plan, you receive reduced lifetime monthly payments plus a line of credit for the remaining principal limit. In a modified term plan, you receive term payments for a set period plus a line of credit.

The borrower decides how to split the principal limit between the monthly payment portion and the line of credit. For example, with a $300,000 principal limit, you might allocate $200,000 to tenure payments and $100,000 to the line of credit. The tenure payments are calculated on the $200,000 allocation, resulting in smaller monthly amounts than a full tenure plan, but the $100,000 line of credit grows over time and remains available for emergencies.

Modified plans are the most popular choice among the borrowers I work with. Approximately 40-50% of my HECM clients choose a modified plan because it addresses two needs simultaneously: predictable monthly income and a financial safety net. A couple in Laguna Beach selected modified tenure, allocating 65% to monthly payments and 35% to their line of credit. The monthly payment supplements their Social Security, while the credit line — which has grown by over 30% since origination — provides peace of mind for future home repairs or medical expenses.

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Expert Summary: Choosing the Right HECM Payment Plan

Selecting the right HECM payment plan is a decision that shapes your financial security throughout retirement. The tenure plan provides lifetime income certainty. The term plan delivers higher payments during a critical bridge period. The line of credit offers maximum flexibility with a growth feature unavailable in any other financial product. Modified plans combine the benefits of monthly income and flexible reserves. The ability to switch plans after closing for approximately $20 means you are not locked into any single choice permanently.

The most important variable in maximizing your HECM proceeds is the lender you choose. Different wholesale lenders offer different margins, rate structures, and closing cost packages, all of which directly affect your principal limit and payment amounts. As a wholesale mortgage broker with access to 200+ lenders, I compare HECM products across multiple lender channels to identify the combination that delivers the highest principal limit and most favorable terms for your specific situation.

Every borrower's retirement needs are different. Whether you need steady monthly income to supplement Social Security, a growing line of credit for long-term security, or a combination of both, the right plan depends on your age, equity position, existing income sources, and financial goals. I provide complimentary side-by-side plan projections that show exactly how much you receive under each option.