What is a home equity conversion mortgage (HECM)?

A home equity conversion mortgage (HECM) is indeed a mortgage loan that allows homeowners, typically those aged 62 and older, to withdraw cash against the equity they have built up in their homes. This type of reverse mortgage enables homeowners to convert a portion of their home equity into usable funds while still retaining ownership of the property. The amount available to borrow typically depends on several factors, including the homeowner's age, home value, and current interest rates.

This financial product is designed to provide seniors with additional income, helping them cover living expenses, pay medical bills, or even support lifestyle choices, all while living in their own homes without the obligation of monthly mortgage payments. Instead, the loan is repaid when the homeowner sells the home, moves out, or passes away.

In contrast, the other options describe different financial products or programs that do not apply to the definition of a HECM. Understanding the unique feature of HECMs is essential in recognizing how they serve a specific demographic and provide financial flexibility while leveraging the value of their homes.