Home Equity Conversion Mortgage (HECM)
With reverse mortgages, including HECMs, your
total debt increases over time. You should be aware of this and
mortgage considerations before proceeding
with a reverse mortgage.
A Home Equity Conversion Mortgage (HECM) is a reverse
mortgage made by private lenders that is insured by the Federal
Housing Administration (FHA), part of the U.S. Department of
Housing and Urban Development (HUD). With a HECM, you have multiple
options for receiving payments, with no limitations on how you
use the money. You can use a HECM to pay for medical expenses,
to supplement your social security or retirement income, for
house repairs, travel, or any other living expenses. The
money is usually tax-free (always confirm your individual tax
circumstances with an accountant or attorney), but it may count
as income for Medicaid eligibility or other state assistance
The borrower remains the owner of the home and may sell it and
move at any time, keeping the sales proceeds that exceed the mortgage
balance. If the mortgage balance grows to exceed the value of the
property, a borrower cannot be forced to sell the home to pay off
the mortgage (as long as the borrower continues to pay their property
taxes, homeowners insurance, and other home expenses).
A HECM loan need not be repaid until the borrower moves, sells,
or dies (a borrower can live in a nursing home or other medical
facility for up to 12 months before the loan becomes due and payable).
When the loan must be paid, you or your estate will repay the cash
you received from the reverse mortgage, plus interest and other
fees, to the lender. The remaining equity in your home, if any,
belongs to you or to your heirs. If the loan balance exceeds
the value of the property, the borrower (or the heirs) will owe
no more than the value of the property. FHA insurance will cover
any balance due the lender. None of your other assets (including
personal checking or savings accounts) will be affected by HUD's
reverse mortgage loan, and this debt will never be passed along
to your estate or heirs.
To be eligible for HECM loan, you must:
- Be 62 years of age or older
- Own your home free and clear or have a low mortgage balance
that can be paid off at closing with proceeds from the HECM loan
- Live in the home as the primary residence
- Complete a HECM counseling session with a HUD-approved reverse
There are no income, asset, credit or medical qualifications required,
and closing costs may be financed in the mortgage.
An eligible property can be a single-family detached home, a townhouse,
a one- to four-unit building with one unit occupied by the borrower,
a manufactured home (mobile home), a unit in an FHA-approved condominium
or cooperative, or a unit in a planned unit development. The property
must be in reasonable condition and meet FHA standards, but the
owner can pay for repairs using the reverse mortgage.
There are no limits on the value of homes qualifying for a HUD
reverse mortgage, but the amount that may be borrowed is capped
by the maximum FHA mortgage limit for the area, which varies from
$172,632 to $312,895 (see HECM
Loan Amount and Application).
Before applying for a HECM, the program requires
that you receive free reverse mortgage housing
counseling from an independent HUD-approved
reverse mortgage counseling agency ( toll-free 1-800-569-4287).
The counselor must explain the loan’s costs, financial implications,
and alternatives. For example, counselors should tell you about
government or nonprofit programs for which you may qualify, and
any single-purpose or proprietary reverse mortgages available in
The information provided in this website is
not legal advice and should not be interpreted as legal advice.
This website is intended to provide a basic understanding of this
information in summary form. This information may not be comprehensive,
is subject to change, and may not apply to all individual circumstances.
Any information received here should be confirmed with the appropriate
government agencies or with an attorney, particularly as it relates
to your individual circumstances. Your use of this website indicates
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