You’ve probably seen the television commercials with Henry Winkler or Tom Selleck, right? So you might be asking, what does HECM stand for anyway?
The acronym HECM (often pronounced heck-um by industry insiders) stands for home equity conversion mortgage, which is the most common reverse mortgage product available in the United States today. If anybody you know recently obtained a reverse mortgage, it’s a good bet it was a HECM.
The HECM program was created by Congress and signed into law by President Ronald Reagan as part of the Housing and Community Development Act of 1987. Today, the program is overseen and regulated by the Federal Housing Administration (FHA) under the authority of the Department of Housing and Urban Development (HUD).
Over 50,000 HECM reverse mortgages are written every year in the US and the number is set to grow significantly in the future.
What is a HECM Reverse Mortgage?
The HECM reverse mortgage is simply at type of home loan that gives seniors age 62 or older a way to tap into their home’s equity without taking on a mortgage payment or giving up ownership of the home. A reverse mortgage enables a senior to borrow against their home equity tax-free and never have to make a mortgage payment or pay back any of the money as long as they continue paying their property taxes and homeowner’s insurance and live in the home.
The HECM reverse mortgage is highly versatile and can be tailored to each borrower’s specific needs and situation. Loan proceeds can be taken as a lump sum payout, credit line, monthly term or tenure payment, or some combination of all of these.
Proceeds can be used to eliminate existing mortgages and/or credit card debt, supplement income, or supplement existing retirement assets.
How Much Can I Qualify For?
How much you qualify for depends on four main factors: the appraised value of the home, the age of the youngest borrower, current interest rates, and what program you select.
When rates are low and home values are up, it’s a good bet you’ll qualify for more. If you’re older, you tend to qualify for more as well. However, most borrowers tend to qualify for between 50% to 60% of their home’s value.
If you’d like to find out exactly how much you can get, be sure to check out the reverse mortgage calculator.