Home Equity Conversion Mortgage (HECM)
What is a Home Equity Conversion Mortgage (HECM)?
A Home Equity Conversion Mortgage (HECM), commonly known as a reverse mortgage, allows homeowners aged 62 and older to convert a portion of their home equity into cash without making monthly mortgage payments. A HECM loan is backed by the Federal Housing Administration (FHA) and can only be obtained through an FHA-approved lender.
How a HECM Loan Can Help You
If you qualify for a HECM loan, you can use the funds to:
Pay off your existing mortgage
Cover medical bills, vehicle loans, or other debts
Improve monthly cash flow
Fund home repairs or renovations
Create a financial safety net for unplanned expenses
Eligible Property Types for HECM Loans
A reverse mortgage is available for:
Single-family residences
2-4 unit properties (one unit must be occupied by the borrower)
Manufactured homes (meeting FHA guidelines)
Modular homes
Planned Unit Developments (PUDs)
FHA-approved condominiums
HECM Loan Benefits
A reverse mortgage provides several unique advantages, including:
| Benefit | Description |
|---|---|
| Eliminates monthly mortgage payments | No requirement to make monthly mortgage payments (must maintain property taxes, insurance, and home upkeep). |
| Stay in your home | Maintain homeownership and continue living in your residence. |
| Tax-free loan proceeds | Funds received are not considered taxable income (consult a tax advisor for details). |
| Heir protection | Any remaining equity after loan repayment belongs to your heirs. |
| Flexible repayment | You can repay as little or as much as you choose each month or make no payments at all until the loan is due. |
| Non-recourse loan | If the loan balance exceeds home value, neither you nor your heirs are responsible for the deficit—FHA covers it. |
| Line of credit growth | If unused, the available line of credit increases over time, providing additional financial security. |
Did You Know? You can also use a reverse mortgage to buy a new home that better suits your retirement lifestyle. This option is called a HECM for Purchase.
Common Uses of a
HECM Loan
A reverse mortgage can be a powerful financial tool in retirement. Homeowners use HECM funds for:
Refinancing an existing mortgage (eliminating required monthly payments)
Supplementing cash flow to cover living expenses
Bridging the Medicare gap (for retirees aged 62-65)
Creating a standby line of credit for emergencies
Funding major expenses (home renovations, in-home care, travel, etc.)
Consolidating debts
Eligibility Requirements for a HECM Loan
To qualify for a Home Equity Conversion Mortgage, you must:
Be at least 62 years old (youngest borrower on title)
Live in the home as your primary residence
Have sufficient home equity
Use the HECM loan to pay off any existing mortgage
Live in a single-family home, 2-4 unit owner-occupied property, approved condo, or manufactured home
Meet financial eligibility criteria set by HUD
Complete mandatory reverse mortgage counseling with a HUD-approved counselor
HECM Borrower Responsibilities
Once approved for a HECM loan, you must:
Maintain your home according to FHA standards
Continue paying property taxes and homeowners insurance
Use the home as your primary residence
Important: The loan becomes due and payable if you fail to meet these obligations or upon the passing of the last borrower. Your heirs can repay the loan to inherit the property or allow the lender to sell the home.
Ways to Receive HECM Loan Proceeds
You can access your reverse mortgage funds in multiple ways:
| Payment Option | Description |
| Lump Sum Payout | Receive the entire loan amount upfront. |
| Fixed Monthly Advances | Get a set amount each month for a specific period. |
| Tenure Plan | Receive payments for the life of the loan. |
| Term Plan | Get payments for a set number of years. |
| Line of Credit | Withdraw funds as needed, with an increasing available balance over time. |
| Combination | Blend monthly payments with a line of credit. |
Ready to Unlock Your Home’s Equity?
If you’re curious about your eligibility or want to see how much you may qualify for, try our free reverse mortgage calculator today!
A HECM loan could be the key to unlocking financial freedom in retirement. Connect with one of our FHA-approved lenders to explore your options.
Get Started Today!
Take control of your financial future with a Reverse Mortgage. Contact us today for a FREE, no-obligation consultation and see how much you can qualify for.
📞 Call us at (808) 517-6416
📩 Request a free Reverse Mortgage Guide – elias@c2hawaii.com
Your home has been your greatest asset—now let it work for you!