What is the Home Equity Conversion Mortgage?
The Home Equity Conversion Mortgage (HECM) is an FHA insured reverse mortgage and is the safest and most popular type of reverse mortgage on the market. HECM’s are the only reverse mortgage insured by the federal government through the Federal Housing Administration (FHA), a division of the Department of Housing and Urban Development (HUD).
The HECM allows home-owners, ages 62 and better, to convert part of their home equity into tax-free proceeds.* There is never a required monthly mortgage payment on a HECM, and there is no pre-payment penalty if the consumer ever chooses to pay the loan back in part or in full. Repayment of the loan can never exceed the home’s value and the heir’s will never inherit a debt, unless they choose to retain the home as their own property.
The borrower retains the home as long as loan terms are satisfied. These terms include maintaining the property and paying property taxes, homeowner’s insurance and any HOA fees. The home must be the borrower’s primary residence.
*Consult a tax specialist