A Home Equity Conversion Mortgage (HECM) is an FHA reverse mortgage loan available to homeowners aged 62+ that requires no monthly mortgage payments. The HECM pays off any current mortgage they may have, freeing up the cash they had needed previously to make their monthly mortgage payment and allowing for more discretionary income. If the homeowner qualifies for more cash than the balance of their current mortgage or does not have a mortgage on their home, the funds can be paid to them as cash, a line of credit or monthly payments, it is their choice how to take their funds. The amount a person may qualify for is determined by their age, the value of the home and the current interest rates. The funds can be used for anything they may want or need, such as home improvements, unexpected medical costs, and in-home care. Because the loan does not require monthly mortgage payments, it allows the homeowner the flexibility to retain ownership of their home while they utilize the equity to fund their retirement. HECM reverse mortgages are the most common type of reverse mortgage. All HECM’s are Reverse Mortgages but not all Reverse Mortgages are HECM’s; some reverse mortgages are proprietary loans available through specific lenders and are not FHA loans. HECM reverse mortgages were created to give homeowners aged 62+ access to funds to stretch their retirement savings and provide additional financial security. Ultimately, the goal of the reverse mortgage program is to allow seniors to maintain their homeownership and live a more quality life.
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