HECM. Now there is a funny name for a mortgage program. Whoever names these things should come from a marketing background and be able to use 4 letters to spell something that doesn’t sound so… so… weird.
HECM stands for the FHA Home Equity Conversion Mortgage and this is the official title for the FHA reverse mortgage program. The FHA HECM program is becoming more popular as the baby boomer generation enters retirement and more people are needing to convert the equity in their homes into cash.
FHA HECM Program Highlights
The FHA HECM program is a federally-insured home loan that lets seniors convert a portion of their home’s equity into cash. The equity can be paid to directly to the borower any one of three ways:
- in one large lump sum
- in monthly term or lifetime payments
- in a line of credit held in an interest bearing account until the funds are needed
With an FHA HECM reverse mortgage, unlike a traditional home equity loan or second mortgage, NO REPAYMENT of the loan is necessary, as long as the senior lives in the home.
FHA HECM Requirements
- Seniors must be Age 62 years or older
- You must have equity in the home to qualify
- You must occupy the home as your primary residence
- You must attend an FHA HECM counseling session by an approved FHA HECM counselor
- You must keep the home in good repair
All money that a senior receives from the FHA HECM reverse mortgage program is tax-free – so it is a great source of tax-free retirement income. And with the way that the economy is today, I think more than just a few seniors could use more tax-free retirement income.