Which mortgage is specifically designed for seniors wanting to convert their home equity into cash?

The Home Equity Conversion Mortgage (HECM) is specifically tailored for seniors who wish to tap into their home equity and convert it into cash. This type of mortgage allows homeowners aged 62 and older to borrow against their home equity without having to make monthly mortgage payments, as long as they continue to pay property taxes, homeowner's insurance, and maintenance costs. The loan amount is based on the home’s appraised value, the borrower’s age, and current interest rates.

In contrast, a standard reverse mortgage is typically a broader term but is often used interchangeably with HECM. However, HECM is the only reverse mortgage insured by the federal government, providing additional security for seniors. Fixed-rate mortgages and conventional mortgages, on the other hand, are traditional loan types not specifically designed for seniors looking to convert home equity into cash. They require monthly payments and do not focus on accessing home equity in the way a reverse mortgage does.