A Home Equity Conversion Mortgage (HECM) is commonly known as a reverse mortgage and is FHA insured. A reverse mortgage is a loan secured by a home, but, unlike a traditional mortgage, repayment is deferred to a later date, typically at the sale of the home.
A HECM can have a fixed rate or adjustable rate, either monthly or annually. In a fixed-rate HECM, the borrower receives all of their proceeds at loan closing, and the loan cannot be drawn from in the future. An adjustable-rate HECM is open-ended, allows for future draws, and allows for periodic prepayments that may increase the ability to borrow in the future. An adjustable-rate HECM contains a line of credit that is not taxed to the borrower when drawn. This provides a safe solution with built-in, no recourse equity protections for adults 62+ and their heirs.