exterior of single family home with front yard landscape

The Home Equity Conversion Mortgage (HECM) is a program available to homeowners over the age of 62. The HECM is a type of reverse mortgage that enables homeowners who have little or no mortgage balance to borrow against the equity in their home. The main benefit of this type of loan is that it allows seniors to convert home equity into cash. The FHA insurance program insures this HUD approved loan.

This is a good option for senior homeowners who have a small outstanding mortgage and want to cash it out without selling their homes. This loan can also be used to purchase a primary home as well. Funds can be used to purchase both new and resale homes. No credit check is required.

The loan is based on the value of your home, amount of down payment and age of borrower. Real estate agent Gracie Nilson of Nilson Realty Brokers said, "Many of our client's opt to pay cash for their home, however when they express concerns about utilizing such a large portion of their funds in these economic times, we let them know about the new FHA HECM loan.

Clients seem skeptical at first since it sounds, too good to be true. However once they have all the information, they are thrilled and can't believe they will never make another mortgage payment.” Gracie is a real estate agent who specializes in active adult communities in Southern California, so the program works out great for many of her buyers.

How Do You Qualify?

To qualify, the home must be in use as a principal residence, and be owner occupied within 60 days of closing. There are five types of payment options: tenure, term, a line of credit, a modified tenure, and a modified term. The homeowner keeps their home and is allowed to move or sell their home whenever they choose.

A good protection feature of these loans is that the lender cannot force the homeowner to sell the home, and the loan does not need to be repaid until the homeowner moves, sells, or dies. The U. S. Department of Housing and Urban Development (HUD) provides approved reverse mortgage counseling agents, and requires that borrowers receive consultation prior to engaging in a reverse mortgage.

When meeting with a HEMC counselor, the homeowner’s eligibility will be ascertained, as well as types of loans and provisions for when the mortgage comes due. The consultation interviews can be conducted over the phone. Reverse mortgages were first created in 1987 by the United States Congress under the Housing and Community Development Act of 1987. This allowed for the creation of a federal mortgage insurance program.

Further information can be obtained by calling HUD's toll-free housing counseling information line (800) 569-4287, or visiting the HUD HECM website, where you can find a list of HUD approved reverse mortgage counseling agencies. See Also: The Best Home Financing Solution for Retirees and A Reverse Mortgage: Is it Right for You? Creative Commons License
Home Equity Conversion Mortgages Great for Seniors by Bill Ness is licensed under a Creative Commons Attribution-No Derivative Works 3.0 United States License.