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The Home Equity Conversion Mortgage (HECM) is the only reverse mortgage insured by the federal government. HECM loans are insured by the Federal Housing Administration (FHA), which is part of the U.S. Department of Housing and Urban Development (HUD).
The FHA tells HECM lenders how much they can lend you, based on your age and your home's value. The HECM program limits your loan costs, and the FHA guarantees that lenders will meet their obligations.
HECMs Versus Other Reverses
HECM loans generally provide the largest loan advances of any reverse mortgage. Often they provide a lot more cash than any other program. HECMs also give you the most choices in how you can have the cash paid to you.
The money you get from a HECM can be used for any purpose. Although they are not cheap, 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 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.
Who is Eligible
HECM loans are available in all 50 states, the District of Columbia, and Puerto Rico. (In Texas, however, HECM creditline options are not available.) To be eligible for a HECM loan:
- you, and any other current 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, a condominium, or part of a planned unit development (PUD). Some manufactured housing is eligible, but cooperatives and most mobile homes are not;
- your home must be at least one year old and 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.
Repaying a HECM
As with most reverse mortgages, you must repay a HECM loan in full when the last surviving borrower dies or sells the home. It also may become due if:
- you allow the property to deteriorate, except for reasonable wear and tear, and you fail to correct the problem; or
- all borrowers permanently move to a new principal residence; or
- the last surviving borrower fails to live in the home for 12 months in a row because of physical or mental illness; or
- you fail to pay property taxes or hazard insurance, or violate any other borrower obligation.
For more valuable information on reverse mortgages visit the following web pages at:
A.A.R.P.
HUD
Financial Freedom
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