A Home Equity Conversion Mortgage, or HECM, is the FHA-insured reverse mortgage program for eligible homeowners age 62 and older. It allows qualified borrowers to access a portion of their home equity while continuing to live in the home as their primary residence.

For many homeowners, a HECM can be used to pay off an existing mortgage, improve monthly cash flow, or create greater financial flexibility in retirement. Unlike a traditional mortgage, there is generally no required monthly principal-and-interest mortgage payment as long as the borrower continues to meet the loan obligations.

With a HECM:

• You continue to own your home and remain on title
• You may access home equity based on age, home value, and loan factors
• You are not required to make monthly principal-and-interest mortgage payments
• The loan balance grows over time as interest and any borrowed funds are added
• The loan generally becomes due when the home is sold, the last borrower leaves the home permanently, or loan obligations are not met

HECM loans are generally designed for homeowners who:

• Are age 62 or older
• Have sufficient equity in the home
• Use the property as their primary residence
• Live in an eligible property type, which may include single-family homes, certain condominiums, and some multi-unit properties that meet program guidelines

Although a HECM does not generally require monthly principal-and-interest mortgage payments, the homeowner must still continue to meet important property-related obligations. These include:

• Paying property taxes
• Maintaining homeowners insurance
• Keeping the home in good repair
• Continuing to occupy the home as a primary residence

These responsibilities are an important part of the program and should be clearly understood before moving forward.

Depending on the borrower’s situation, HECM proceeds may be used in many different ways. Common uses include:

• Paying off an existing mortgage
• Improving monthly cash flow in retirement
• Covering medical or care-related expenses
• Funding home improvements
• Creating a reserve for future needs
• Supporting overall retirement planning

A HECM is not the right solution for every homeowner, but for the right borrower it can be a valuable financial tool. At SoCal Reverse Mortgage, we help homeowners understand how the program works, what the responsibilities are, and whether it makes sense for their goals.