The Home Equity Conversion Mortgage (HECM) is an ingeniously constructed financial instrument that can meet a wide variety of needs of homeowners 62 or older. In addition to its versatility, HECMs are also extremely flexible, permitting changes in the ways in which seniors receive funds as their needs change over the years. Inevitably, however, the HECM is also very complicated, which prompts the need for this article. It is organized around the 21 questions that I receive most often from seniors. HECM Reverse Mortgage is a loan to a senior secured by a mortgage lien on the senior’s house, with most of the loan proceeds usually paid out over time rather than upfront, and with no repayment obligation so long as the senior lives in the house. Requirements for Obtaining a HECM Reverse Mortgage must be 62 years of age or older and have significant equity in either a home that is your permanent residence, or one you plan to purchase using the reverse mortgage.

The house must be single family, in a 2-to 4 family structure, in an FHA-approved condominium, or an approved manufactured home, any existing mortgage on the home must be paid off when you obtain the HECM. Hence, it cannot be larger than the maximum cash draw available on the reverse mortgage unless the senior wants to tap other funds to make up the difference. Some seniors might find it advantageous to do this in order to eliminate the payment on the existing mortgage. HECM Reverse Mortgages is differ from standard mortgages because most seniors have some understanding of how standard mortgages work, because they probably had one for some years, so understanding how HECMs are different may be the best way to understand HECMs. The purpose of the major purpose of a standard mortgage is to facilitate the purchase of a house, or to refinance a mortgage that had been taken out earlier for that purpose. A reverse mortgage is designed to provide an elderly homeowner with spendable funds that can be used for a variety of purposes, including home purchases.