What's the Difference Between a HECM vs. Reverse Mortgage?
A home equity conversion mortgage (HECM) is insured by FHA that allows those age 62 and older to tap into a portion of their equity. President Ronald Reagan signed the law in Feb. 5, 1988, and the first HECM originated in 1989.
A reverse mortgage is an investor’s proprietary product. The first one originated in 1961 in Portland, ME. Today’s proprietary or jumbo products are available to those age 60 and older.
Though both products have similar consumer safeguards, eligibility, and guidelines. The biggest difference is that the HECM follows the FHA’s national maximum claim amount, which for 2021 is $822,375. The Reverse Mortgage has up to $4 million loan amounts.
Both products allow borrowers to tap into a portion of their equity that they have worked their whole life to achieve.
The age of the youngest borrower, the expected interest rate, and the home value/max claim amount are the three factors that determine which product eligibility for a borrower.