HECM Loans

A Home Equity Conversion Mortgage (HECM) loan is an FHA insured reverse mortgage for homeowners aged 62+. A HECM allows you to access home equity without the need for monthly mortgage payments. 

HECM's main feature is the ability to access home equity to supplement or enhance one's retirement resources.  Features also include:

• Tax-free income*
• No monthly mortgage payment unless you want to for as long as you occupy the property.
• Borrower continues to hold title to their home an retains ownership
• You can use the funds however you wish. Some popular purposes include: medical expenses, in-home care, living expenses, travel or entertainment and home improvements.
• Proceeds may be received via partial lump sum, monthly payments, a line of credit or any combination of these.

HECM loans provide several benefits compared to conventional mortgages and other credit lines:



• They allow you to access substantial funds derived from the equity built up in your home.
• Unlike other financial products, they don't necessitate income or credit score qualifications, as they are based on the asset value.
• The repayment plans are versatile and can be customized according to your specific requirements.
• You have the option to choose between fixed-rate and adjustable-rate programs, depending on which aligns better with your objectives and needs.
• There are no penalties for early repayment, giving you the freedom to settle the loan sooner if you prefer.

HECM Qualifications

To be eligible for a HECM loan, applicants must fulfill specific requirements as per FHA guidelines, including:

• Applicants must be at least 62 years old and have considerable equity in their primary residence.
• The property in question must be the applicant's primary residence.
• The total amount of any existing mortgages or liens on the property should not surpass its appraised value.
• Prospective borrowers are required to complete counseling approved by HUD before the closing of a HECM loan.
• There must be sufficient funds available to cover all closing costs associated with acquiring a HECM loan.
• The title of the property should be clear of any encumbrances or liens, except those pertaining to real estate taxes and insurance premiums.
• Additionally, the property must comply with all relevant local zoning laws and FHA standards for safety and habitability.

HECM Loans, also known as Home Equity Conversion Mortgages, come with FHA insurance, requiring borrowers to pay a Mortgage Insurance Premium (MIP) both at closing and during the life of the loan, which is added to the loan balance.

The initial MIP is based on either the home's appraised value or a capped amount of $1,089,300 (the 2023 national HECM limit).

The ongoing FHA insurance premiums are calculated from the outstanding loan balance each month. Interest rates on HECM loans tend to be lower than traditional mortgages, thanks to advantages like the absence of required monthly mortgage payments and the possibility of accessing funds through a reverse mortgage line of credit.



When considering a HECM Loan, it's crucial to remember that borrowers are still obliged to pay property taxes and homeowner's insurance, irrespective of whether there is an existing mortgage. Furthermore, these FHA-insured loans often provide more safeguards against foreclosure compared to other loan types.

*Consumers should consult with a tax professional