A Guide To FHA's Home Equity Conversion Mortgage (HECM)

A home equity conversion mortgage (HECM) loan has been introduced by the Federal Housing Administration (FHA) for the purpose of providing housing solutions to senior citizens. This is a federally insured reverse mortgage loan program in which borrowers can use their home equity towards obtaining a mortgage loan.

Benefits of home equity conversion mortgage loan:

This loan program is unique is several aspects. The borrower is not required to make any repayments on the loan as long as the home is his primary residence. Under this program, FHA does not indicate any sorts of income ceiling. The eligibility criteria for this loan program are also quite convenient. The applicant must be 62 years old and should be the prime owner of the property. Apart from that, he should be residing in the home and must have a very low mortgage balance. Also, the borrower is expected to have complete understanding about the loan program. For this purpose, attending a consultation and counseling session from a HECM counselor is mandatory for the applicant before applying for the loan.

Another unique feature of home equity conversion mortgage loan program for seniors is its convenient repayment terms. The borrower has the flexibility to opt for different modes of loan payment. Also, a borrower can either receive the amount in the form of monthly equated installments or even opt for a line of credit mode of payment.

However, there are certain factors based on which the eligible loan amount is calculated. These include the age of the applicant, the equity built up over the home, FHA limits in the region of residence and the existing interest rates.

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