home equity conversion mortgage (redirected from HECM)

Reverse Mortgage

A loan borrowed against the value of one's home. In this situation, the lender gives the borrower the amount of the loan and the borrower makes no payments and retains title to his/her home. When the borrower moves from the house or dies, the lender takes possession of the home, which it then sells to repay the loan. Any extra profit is remitted to the borrower or his/her estate. A lifetime reverse mortgage allows a homeowner to access his/her home's equity without the inconvenience of moving. It is a financial instrument designed to help homeowners who are cash poor, and is limited to senior citizens. In the United States, one must be 62 years old in order to be eligible for a lifetime reverse mortgage, while the U.K. requires potential borrowers to be at least 55. It is also known as a lifetime reverse mortgage.

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home equity conversion mortgage (HECM)

An FHA-insured reverse mortgage loan allowing persons to borrow money against the equity in their home with no repayment usually necessary until after death.The money may be taken in one lump sum,or in payments over time.

The important elements are

• The borrower and any other current owners of the home must be aged 62 or over and live in the home as their principal residence.

• The home must be a single-family residence in a one- to four-unit building, a condomini- um, or part of a planned unit development (PUD). Some manufactured housing is eligible, but cooperative apartments are not.

• The home must be at least 1 year old and must meet HUD minimum standards, except that the HECM can be used to make necessary repairs.

• Applicants must discuss the program with a HUD-approved counselor before making any decision.

• Repayment in full is due (1) when the last surviving borrower dies, (2) when the home is sold, (3) when the borrowers permanently move elsewhere or fail to live in the home for 12 months, or (4) if there is a default in mortgage terms, such as failing to pay property taxes or keep the property insured or allowing it to deteriorate below HUD minimum standards.

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Home Equity Conversion Mortgage (HECM)

A reverse mortgage program administered by FHA.

See Reverse Mortgage/FHA's Home Equity Conversion Mortgage (HECM).