Glossary of Terms

Glossary › Home Equity Conversion Mortgage (HECM)

Home Equity Conversion Mortgage (HECM)

A Home Equity Conversion Mortgage (HECM) is a specific type of reverse mortgage that is insured by the Federal Housing Administration (FHA). It allows homeowners, typically aged 62 and older, to convert part of their home equity into cash while retaining ownership of their home.

Key features of HECMs include:

  1. Access to Home Equity: Homeowners can access a portion of their home’s equity, which can be received as a lump sum, monthly payments or a line of credit.
  2. No Monthly Payments: Borrowers do not need to make monthly mortgage payments. The loan is repaid when the homeowner sells the home, moves out or passes away.
  3. Eligibility Requirements: To qualify, homeowners must be at least 62 years old, live in the home as their primary residence, and have sufficient equity in the home.
  4. FHA Insurance: HECMs are insured by the FHA, providing protection for both borrowers and lenders. This insurance ensures that borrowers can remain in their home.
  5. Counseling Requirement: Borrowers must undergo counseling from a HUD-approved counselor to ensure they understand the terms and implications of the loan.