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Home Equity Conversion Mortgage (HECM)

The most popular reverse mortgage program in the US. It’s administered by HUD and is also referred to as an FHA reverse mortgage. Reverse mortgages allow homeowners 62 and over to convert some of their home equity to cash, but they are not required to repay the loan until they move out, sell the property or die.

The most popular reverse mortgage program in the US. It’s administered by HUD and is also referred to as an FHA reverse mortgage. Reverse mortgages allow homeowners 62 and over to convert some of their home equity to cash, but they are not required to repay the loan until they move out, sell the property or die.

HECM (pronounced “heck ‘em”) loans are called reverse mortgages because instead of the borrower making monthly payments to the lender, the reverse mortgage lender pays the borrower.  HECM borrowers can take their home equity proceeds in several different ways:

  • Lump sum of cash
  • Monthly payments for a specified term
  • Monthly payments for as long as they live in the home
  • A line of credit
  • A combination of payouts

Homeowners eligible for HECMs must:

  • Be at least 62 years old
  • Own the home outright or have a mortgage balance small enough that it can be paid off with the HECM proceeds
  • Attend reverse mortgage counseling sessions with a HUD-approved counselor
  • Occupy the home as a principal residence

The amount that can be borrowed with a HECM depends on the age of the youngest homeowner, current reverse mortgage interest rates, and the property value. Reverse mortgage borrowers should shop and compare loans from several competing lenders, because the government does not set reverse mortgage rates.

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