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Basics of HECMs

Retirement can mean a lot of things. You have more time to take in new experiences, enjoy life and spend time with loved ones. However, it also means downsizing financially. If you are retired, you have probably hit the 62-year mark.

That means you’re now qualified to apply for an HECM mortgage.

What does HECM mean?

A type of reverse mortgage, HECM stands for Home Equity Conversion Mortgage.

How does it Work?

The loan allows you to turn part of your home’s equity or value into cash, which you can use to cover immediate or major expenses. So, every month, you’ll receive funds that you can use to pay off your property taxes, mounting medical bills, and homeowner’s insurance. This is especially ideal if you’ve got high homeowner’s insurance rates that include flood insurance coverage.


No payment must be made on the loan. After you’ve moved out of your home for a year, or if you die, then that’s the only time payments can be made on the outstanding loan by your surviving heirs. This makes it possible for them to retain the home in the family. Some HECM lenders limit the funds you can borrow so it won’t go over the appraised value of your home. So when the time comes, your heirs or family will only have to pay for the appraised value if they want to pay off the loan.


There are a number of things you’ll need to consider when you start looking around for an HECM lender. This include:

*      Fees and quotes. Some lenders overcharge, so compare quotes and charges to get the best deal possible.

*      Interest Rates. Some lenders offer variable rates that change with market inflation. Others provide fixed interest rates. However, you get more money from variable rates than fixed ones.

*      Conditions and policies. Make sure the terms of the loans are fair and have no legal loopholes for you.