Reverse Mortgages: Home Equity Conversion Mortgage

A Reverse Mortgage is a loan that works in reverse-the lender makes monthly payments to the homeowner based on the home equity.

The Home Equity Conversion Mortgage (HECM) is the oldest and most popular Reverse Mortgage product.

To qualify you must be at least 62 and own your own home or condominium. The Home Equity Conversion Mortgage is available from HUD-approved lenders in all 50 states.

The loan size of the Home Equity Conversion Mortgage may vary. Three criteria are used to determine size:

1. The borrower's age
2. The value of the home
3. Current interest rates

(Maximum loan limits do vary by region.)

A borrower can choose from four payment methods:

• A lump-sum payment
• Equal monthly annuity payments to the homeowner for up to the amount of equity in the home. The number and schedule payments depend on the equity in the home and age of the recipient.
• An equity line of credit that the borrower can draw upon as needed
• A combination of annuity payments and equity line

No repayments will be required as long as the borrower remains in the home. Home Equity Conversion Mortgages must be obtained from HUD-approved lenders.

Borrowers must also first meet with an approved HUD counselor to review the Reverse Mortgage product before submitting an application.