HECM or Home Equity Conversion Mortgage was created by the U.S. Department of Housing and Urban Development ( HUD) in 1989. It was one of the better and more acceptable offerings in the reverse mortgage category. FHA is a division of HUD. This should give you a warm fuzzy feeling. HECM was developed between HUD and Congress. They wanted to help insure a comfortable life for people over the age of 62 whose pensions and retirement funds could not keep up with inflation.
FHA insures these HECM reverse mortgage loans. Your loan is protected. HECM reverse mortgages are by far the most popular type of reverse mortgage currently available and are available in every state.
You loan does not come due until you leave your house permanently. You will not need to make payments until you move out or pass away. If you pass away your estate will have to settle up your reverse mortgage. If you take the monthly payment option and you live longer than predicted by the loan officer, they have to continue to pay you. This is great incentive to live a long and healthy life – someone will pay you to stay alive.
Although certain requirements hold true for various reverse mortgages, an HECM loan also has other considerations - payment options, additional costs, lending limits and the requirement of meeting with a HUD approved counselor.
HECM covers a wide range of home types but keep in mind they have the lowest lending limits of all the available reverse mortgage options available.
Anyone can qualify for an HECM loan if they meet the following requirements:
- Be at least 62 years of age
- Live in your home full time
- Your home meets qualifications
- Have at least some equity built up in your home
- Your name must be on title
If multiple individuals qualify for an HECM loan but the loan will be based on the youngest homeowner. Keep this in consideration. If you aren't in any rush, maybe waiting a few years and being eligible for more cash may be a better option. The older you are the more money available for borrowing.
The requirement of putting the loan in the youngest person's name should be considered. The remaining people in the home maybe stuck without a home if something happens to the person who's name is on the loan.