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Home Equity Conversion Mortgage (HECM)

A Home Equity Conversion Mortgage is a financial product designed to help senior homeowners access the equity in their home and use it to supplement their retirement income. HECMs are FHA-insured loans, meaning they are backed by the Federal Housing Administration and enjoy certain protections that other lenders may not offer.

HECMs provide the elderly with the opportunity to draw upon the equity of their homes without the need to sell or move out. There are several different types of reverse mortgages, but the HECM is the most prevalent, accounting for 90 percent of all loans.

HECMs are not without their drawbacks, however. Maximum loan amount are limited, as are eligibility requirements, and mortgage insurance premiums are a required expense. However, because it is backed by the FHA, HECMs offer attractive terms that may be better than many proprietary loans.

To qualify for a HECM, an applicant must be at least 62 years old, living in the property, and the home must meet FHA minimum property standards. The proceeds from a HECM can be used for any purpose, and there are no restrictions on how the money can be used.

HECMs are a great way for retirees to supplement their income, pay for medical expenses, make home improvements, and more. By accessing the equity in their home, seniors can gain financial freedom and peace of mind.

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