Home Equity Conversion Mortgages (HECM): An Overview


What are HECM’s?

Home Equity Conversion Mortgages (HECM) are a special loan offering provided by the Department of Housing and Urban Development (HUD) for qualifying seniors. HECM is a reverse mortgage program, allowing homeowners to earn money on their home’s equity. Withdrawing from your built-up equity is an easy way to pocket some extra money for home improvement projects, new property, or investing in your savings.

So, how do you know if you qualify?

There are a few basic criteria to qualify for HECM’s:

  • Must be 62 years of age or older
    • This program is intended for qualifying seniors in the US, so applicants must be 62 years or older.
  • Not be delinquent on any federal debt
    • If you’re seeking a HECM, you cannot be delinquent on any federal debt. Additionally, your financial history will be assessed for debt-payment habits.
  • Be able to afford costs and fees associated with HECM
    • Costs with HECM include origination fees, servicing fees, and mortgage insurance premiums. There are also many ongoing costs that you will take on when acquiring a HECM, such as property taxes, insurance payments, and Homeowner Association fees.
  • Attend an info session with a HECM counselor

There are also a few requirements concerning your property:

  • The property must be a single-family home, a HUD condo, or manufactured housing
  • Own the property
    • In order to qualify for HECM, you must have either fully paid or almost paid off your mortgage. Additionally, you must be the owner of the property you wish to finance with a HECM.
  • Use HECM for your primary residence
    • A HECM can only be used on a property if the property is your primary residence.

All information comes from the HUD website.