What is a HECM and how does it work?

If you're thinking about taking out a reverse mortgage , but you want to minimize the risks associated with this type of home loan, consider a home equity conversion mortgage (HECM). Most loans backed by the value of your home require good credit, steady income and monthly payments. A reverse mortgage — a type of home equity product designed specifically for older people — does not require any of that. With this type of product, you won't owe any payments on your loan until you stop living in the house as your primary residence. But as soon as that happens — whether it's because you move, sell the home, go to a long-term care facility or die — the full sum, plus interest, is due in full. That balloon payment makes it a risky endeavor, and as a result, the federal government regulates it more stringently than most home loan products. Plus, it offers a Federal Housing Administration-insured version of the product: HECM. This could be better suited for those who need a loan of less than $1,249,125 and prefer the protections that come with a government-backed product. CNBC Select details HECM requirements, costs, how it differs from other types of reverse mortgages and the best lenders. You can borrow against the equity accrued in your home with a reverse mortgage Offers in this section are from affiliate partners and selected based on a combination of engagement, product relevance, compensation, and consistent availability. …