Eligibility & Repayment
The Home Equity Conversion Mortgage (HECM) is the only reverse mortgage insured by the federal government. HECM loans are insured by the Federal Housing Administration (FHA), part of the U.S. Department of Housing and Urban Development (HUD).
The FHA tells HECM lenders how much they can lend you, based on your age and your home’s value. The HECM program limits your loan costs, and the FHA guarantees that lenders will meet their obligations.
HECMs Versus Other Reverse Mortgages
HECM loans generally provide the largest loan advances of any reverse mortgage, and give you the most choices in how the loan is paid to you — you can use the money for any purpose.
Although they can be costly, HECMs are generally less expensive than privately insured reverse mortgages. Other reverse mortgages may have smaller fees but generally carry higher interest rates, so on the whole, HECMs are likely to cost less in most cases. The only reverse mortgages that always cost the least are ones offered by state or local governments — but those loans typically must be used for one specific purpose only, such as repairing your home or paying property taxes, and are generally available only to homeowners with low to moderate incomes.
Who Is Eligible
HECM loans are available in all 50 states, the District of Columbia, and Puerto Rico. To be eligible for a HECM loan:
- You, and any other current owners of your home, must be aged 62 or over and live in your home as a principal residence.
- Your home must be a single-family residence in a 1- to 4-unit dwelling, a condominium, or part of a planned unit development (PUD). Some manufactured housing is eligible, but cooperatives and most mobile homes are not.
- Your home must meet HUD’s minimum property standards, though you can use the HECM to pay for repairs that may be required.
- You must discuss the program with a counselor from a HUD-approved counseling agency.
Repaying a HECM
As with most reverse mortgages, you must repay a HECM loan in full when the last surviving borrower dies or sells the home. It may also become due if:
- You allow the property to deteriorate, beyond reasonable wear and tear, and fail to correct the problem.
- All borrowers permanently move to a new principal residence.
- The last surviving borrower fails to live in the home for 12 consecutive months due to physical or mental illness.
- You fail to pay property taxes or hazard insurance, or violate any other borrower obligation.
Metro Real Estate Appraisal Services maintains corporate offices in Sea Isle City, NJ, with a branch office in Delran, NJ. Our primary service area for typical residential appraisals covers southern New Jersey; our commercial and industrial coverage extends across New Jersey, eastern Pennsylvania, and northern Delaware, with nationwide quotes available on larger commercial/industrial properties.