What is a Home Equity Conversion Mortgage (HECM)?

With a Home Equity Conversion Mortgage (or HECM), which is a reverse mortgage insured and administered by the Federal government through the Department of Housing and Urban Development (HUD) and its sister entity the Federal Housing Authority (FHA), you may live in the home as long as you want. You can never be asked to leave your home provided you pay the property taxes, maintenance, and insurance. You or your estate can never be held liable should the home not be worth enough money to pay off the mortgage fully. Neither the lender or the government own your home. It’s always your home. Always in your name. If there is any equity in the home, it’s yours or your heirs.

The HECM is a government program established to help people “age in place” as they get older. HECMs allow seniors to access the equity they have built up in their homes but defer repayment (or make whatever repayments they wish) of any drawdowns, interest, and mortgage insurance on the HECM until they die, sell, or move out of the home.At any time, if you permanently leave the home, and there is no equity in the property, you can simply hand it back to the lender and walk away from any deficits.

The reverse mortgage is different in that it is not intuitively what you think of as a typical mortgage. HECMs have many features similar to a home equity line of credit (a HELOC).Some look like a regular mortgage, with an optional payment plan. Some look like an annuity. HECMs come, though, with far more protections. The HECM has a variety of disbursement options to suit every need.

Also since this is an FHA HECM, the government will guarantee that regardless of who your lender is or their financial condition, you will always have access to the funds available to you under the loan agreement.

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