Reverse Mortgage Basics
HOME EQUITY CONVERSION MORTGAGE
(HECM)
The HECM (Home Equity Conversion Mortgage) is the only reverse mortgage insured by the federal government. HECM loans are insured by the FHA (Federal Housing Administration), which is part of the U.S. HUD (Department of Housing and Urban Development).
The FHA tells HECM lenders how much they can lend you, on your age and home value. The HECM program limits your loan costs, and the FHA guarantees that lenders will meet their obligations.
VERSUS OTHER REVERSES
HECM loans generally provide the largest loan advances of any available reverse mortgage. Often they provide substantially more cash than any other program. HECMs also provide the most flexibility in how the cash can be paid to you.
The money you get from a HECM can be used for any purpose you choose. Although they are not inexpensive, HECM loans can be much less costly than the other reverse mortgages that can be used for any purpose.
Generally, the only reverse mortgages that cost less than HECMs are the ones offered by state or local governments. These loans typically must be used for one specific purpose only, for example, to repair your home, or pay your property taxes. They also generally are available only to homeowners with low to moderate incomes.
HECM ELIGIBILITY
HECM loans are available in all 50 states, the District of Columbia, and Puerto Rico. To be eligible for a HECM loan:
- you, and any other owners of your home, must be aged 62 or over, and live in your home as a principal residence;
- your home must be a single-family residence in a 1- to 4-unit dwelling, or part of a planned unit development (PUD) or a HUD-approved condominium; some manufactured housing is eligible, but cooperatives and most mobile homes are not;
- your home must meet HUD’s minimum property standards, but you can use the HECM to pay for repairs that may be required; and
- you must discuss the program with a counselor from a HUD-approved counseling agency.
During 2005, HUD may extend eligibility to some cooperatives.
