Learn about the FHA Home Equity Conversion Mortgage (HECM) program.

FHA Home Equity Conversion Mortgage (HECM) for Seniors

There is only one reverse mortgage that is insured by the Federal government. The Federal Housing Administration (FHA) insures reverse mortgages from FHA-approved lenders under their Home Equity Conversion Mortgage (HECM) program for seniors who wish to supplement their income by tapping into the equity that they have built up in their home over the years.

How does a HECM work?

If you are 62 years of age, have paid off your mortgage (or only have a small balance left), and the home is your primary residence then you are eligible for the FHA Home Equity Conversion Mortgage program.

The Home Equity Conversion Mortgage program allows the borrower some flexibility in how they withdraw equity from their mortgage. The borrowing optons available to those who qualify for an FHA reverse mortgage include:

  • The borrower receives equal monthly payments for as long as at least one of the borrowers is alive and continues to live in the property as their primary residence (Tenure).
  • The borrower receives equal monthly payments for some fixed number of months (Term).
  • The borrower receives unschedules payments at times and in the amounts specified by the borrower (Line of Credit).
  • The borrower receives both a fixed monthly payment for as long as they are alive and live in the property as well as a line of credit (Modified Tenure).
  • The borrower recieves both a fixed montthly payment for some fixed number of months as well as a line of credit (Modified Term).

Repaying a Home Equity Conversion Mortgage

Although most HECM loans are repayed upon the death of the last home owner on the mortgage or when the house is sold, there are also several other situations in which the borrower might be forced to repay the loan.

As a HECM borrower, you are required to stay current on your property taxes and home owner’s insurance.  If you fail to pay your property taxes or home owner’s insurance then the balance of your HECM loan becomes due.

Borrowers under the Home Equity Conversion Mortgage program are required to use the home they finance with the program as their primary residence. So if permanently move to a new residence, your HECM becomes due.  Also, if you (or the last living borrower) are forced to live elsewhere like a nursing home for 12 months in a row then your loan becomes due.

If the home is not properly maintained and deteriorates, you can be forced to repay the loan if the proper repairs are not made to the property