Home Equity Conversion Mortgage
The federally insured kind of reverse mortgage. What happens to the house after the borrower dies is set by its own rules.
What it means
A Home Equity Conversion Mortgage lets an older homeowner draw on the value of the house and repay nothing while they live there. It becomes due when the last borrower dies, sells, or stops living there.
The heirs generally have a period to act — repay, refinance, sell, or hand the property back — and the loan is non-recourse, so the estate does not owe more than the house is worth.
A non-borrowing spouse may be able to stay in the home under specific conditions, which depend on when the loan was taken out.
Why it matters
The clock starts at the death and the deadlines are real, so a family that waits to find out what a reverse mortgage is can lose the option to keep the house.
It is also where families most often assume they owe the shortfall personally, and generally they do not.
When you are likely to meet it
- When a parent's home carries a reverse mortgage.
- When a servicer writes to the estate after a death.
- When deciding whether to keep or sell the house.