A Home Equity Conversion Mortgage (HECM) is an FHA-insured reverse mortgage that allows homeowners aged 62 and older to convert home equity into cash without making monthly mortgage payments. The loan is repaid when the borrower sells the home, moves out permanently, or passes away.
7 steps across 2 sections
1. Line of Credit Growth Feature
- Unused portion of the line of credit grows at the same rate as the loan's interest rate plus the annual MIP rate
- This growth is guaranteed by HUD regardless of home value changes
- Makes the line of credit option particularly valuable for long-term planning
2. Repayment Terms
- Heirs typically have 6 months to repay (with possible 6-month extension)
- Heirs can sell the home, refinance, or pay off the loan
- If the home sells for more than the loan balance, heirs keep the difference
- If the home sells for less than the loan balance, FHA insurance covers the shortfall