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Home Equity Conversion Mortgages

What is a Home Equity Conversion Mortgage

This type of mortgage allows homeowners over the age of 62 years to use a portion of the equity in their homes for paying expenses in retirement.

What are the Benefits of HECM?

With a HECM you can

  • Get access to fund without selling your home
  • Choose an adjustable or fixed-rate loan
  • Receive the funds as a line of credit, lump sum, monthly payment, or a combination of these options
  • Maintain financial independence

How is a HECM different than a Reverse Mortgage?

A HECM is insured by FHA. It first became available in 1989. By contrast, a reverse mortgage is an investor’s product.

Both products provide consumer safeguards and have similar eligibility requirements. The biggest difference is that HECM allows a maximum claim of up to $822,375. Reverse mortgages allow up to $4 million in loan amounts. Both products allow borrowers to use a portion of their equity to maintain financial flexibility.

Reverse Mortgage Eligibility Requirements

In order to be eligible for a reverse mortgage you must

  • Be at least 62 years old
  • Attend a HUD-approved counseling session and receive a certificate of completion during the application process
  • Reside in the property as your primary residence
  • Your current mortgage balance must be low enough to be paid off by the proceeds of your HECM

Eligible Properties

FHA property eligibility standards apply, so your home must be one of the following:

  • Single family
  • 2-4 unit home
  • FHA-approved condominium
  • Manufactured housing (with a permanent foundation)

Special Considerations


Before you apply for a HECM, you must first speak with a HUD housing counselor. This will help you determine whether a HECM is right for you.

How Repayment Works

A HECM loan uses your home equity to provide your proceeds. The mortgage then becomes due if you pass away, sell the home, or move out. In the event of your death, your heirs can pay the loan by selling it or by refinancing the HECM.

What you’re responsible for

You must continue to pay your property taxes and homeowner’s insurance. You must also maintain the home and keep it in good condition.