Obtaining a consistent source of income is one of the most relieving accomplishments for a retiree. If you own a home, you may be eligible for the Home Equity Conversion Mortgage (HECM) program.
HECM stands for Home Equity Conversion Mortgage, which is a type of reverse mortgage that allows senior citizens ages 62 and older to extract useful income out of their home equity. In a HECM mortgage, the senior’s home becomes collateral that secures a cash advance on a portion of its equity value. The borrower can use the cash for any expense. The loan only becomes due when the borrower stops living in the mortgaged property due to having moved or passed away.
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When you apply for a HECM, you can receive an amount up to an approved percentage of your home equity — the amount you have paid toward your mortgage’s principal balance. The Federal Housing Administration (FHA) also sets a HECM mortgage limit, which in 2025 was $1,209,750 and changes annually. Other factors, such as current interest rates and the youngest borrower’s age, influence the amount that the provider will approve.
There are a few notable differences between an HECM and a traditional mortgage.
In a traditional mortgage, your equity increases as you repay the loan you borrowed. The amount you pay toward the principal is equity that you would typically access by selling the home.
A HECM mortgage offers a different way to access your home equity. The HECM mortgage lets you borrow funds based on your existing home equity without selling the property.
A HECM loan is also different in that it does not have a monthly payment requirement. Although you do not have to pay monthly after obtaining your HECM, the loan amount increases over time. Until payment is due, interest will increase the balance each month.
Monthly repayments characterize standard mortgages, and you may even be required to pay the outstanding balance in the end. One of the unique advantages of a HECM reverse mortgage is that the balance is only due when the borrower sells, vacates or passes away.
Additionally, traditional and HECM mortgages differ in the available distribution options. In a traditional mortgage, the bank or lenders disburse the entire amount at once, allowing the borrower to buy a house. HECM mortgage providers offer the choice between a lump sum or monthly payments. The homeowner can even borrow more if additional equity is available.
A majority of the elderly own their home, but unfortunately, many do not know that their largest asset could supplement their retirement income.
A homeowner who is at least 62 years old can offer their property as collateral to receive a HECM loan equal to some amount of the equity they have accrued. Factors such as age, interest rates and property value determine the total loan amount. Older owners with costlier homes will have a greater borrowing limit. If the applicant is married or applies with a co-applicant, the younger individual’s age will determine the principal offer.
Before the borrower can use the money from the HECM loan, they must payoff any existing mortgages. The money remaining after paying any mortgages is what becomes available.
As far as disbursal is concerned, there are three available options.
You can choose to receive the entire HECM value in one payment. The Single Disbursement Lump Sum option provides access to liquid funds that can help you afford large expenses, such as home renovations or medical expenses. Single Disbursement Lump Sum payments feature fixed interest.
You can choose to receive your equity gradually through fixed monthly payments with variable interest. There are multiple fixed monthly payment options:
Receiving HECM payments as a line of credit allows you to control your principal’s growth. Here, the amount of money the HECM provider approves becomes a spending limit. You can draw funds from the line of credit at any interval until you reach the limit.
Once you know what is a HECM loan, you should take a look at the excellent features that HECM mortgage has, some of which are as follows:
There are numerous advantages to using a HECM mortgage — you may have more reasons than one to borrow this way. Here are some of the key benefits that you can avail:
It is not just you who has to be qualified to seek a HECM mortgage loan. Your property must also meet specific criteria, and there are some other obligations that you need to be mindful of to meet the HECM loan requirements.
Some of the crucial eligibility requirements of the HECM mortgage are as follows:
For your property to fall under the FHA’s HECM Reverse Mortgage program, you must live in your home, and it must fall under these categories:
A HECM loan is not available for the following types of properties:
The bottom line is that a HECM Mortgage has been created to allow seniors to spend their golden years in peace by utilizing their most valuable asset. It could easily serve your purpose, provided you consider all its aspects and use it wisely.
You will retain 100% ownership of your home as long as you meet certain financial and practical obligations.
You will no longer owe mortgage payments, but you will continue to owe other property expenses. One expense you will still owe is property taxes, while homeowner’s insurance is another.
You may be eligible to refinance the HECM if the home’s value has increased since the HECM’s origination, especially if the value surpasses the HUD limit at the time of origination. You can refinance the HECM up to the current limit.
While the principal balance is not due until the end of your time in the home, a HECM comes with some initial cost which are financed in the loan:
A HECM loan is a cash advance on a senior citizen’s mortgage equity that they can spend on anything. The HECM strategy helps older homeowners manage their ongoing expenses by accessing equity prior to selling their homes.
Senior Lending Corporation is a trusted source of HECMs and other types of reverse mortgages. Our licensed advisors are available to discuss your mortgage and determine if a HECM is right for you. We encourage you to contact us online or call 800-822-1190 to speak with a knowledgeable representative.
