Everything You Need to Know About Home Equity Conversion Mortgages (HECM)

A Home Equity Conversion Mortgage (HECM) is a special type of mortgage loan designed for homeowners aged 62 and over. It is the most common type of reverse mortgage and is federally insured. With a HECM, borrowers can access the equity in their homes without having to return it until they leave the house. The higher the value of the property, the higher the payment.

Reverse mortgages can be more expensive than traditional home loans and the initial costs can be high. If you need a fixed amount for a specific repair or tax bill, a single-purpose reverse mortgage is the cheapest option if you can find one. Interest on a reverse mortgage accrues every month, so you'll need to have adequate income to continue paying property taxes, property insurance and home maintenance. Before committing to a reverse mortgage, it's best to talk to a HUD-approved advisor. Homeowners who opt for this type of reverse mortgage should prepare for significantly higher interest rates than if they were opting for a federally insured loan.

If you decide to look for one, review the different types of reverse mortgages and compare before deciding on a particular company. Remember, since your home is likely to have a high value (one of the reasons for opting for a reverse mortgage), you may also want to consider whether downsizing to something smaller would meet your goals and leave you with more capital.

Harry Lammel
Harry Lammel

Unapologetic lover of life. Award-winning family man. Typical husband and father. Music junkie. Food buff.