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HOME EQUITY CONVERSION MORTGAGE (HECM)

What is a HECM?

The most popular form of reverse mortgage is the Home Equity Conversion Mortgage (HECM). They are specialized home loans intended for homeowners who are 62 years of age or older*, enabling them to transform part of their home equity into cash. HECM Mortgages are backed by the Federal Housing Administration (FHA).

*Some programs allow you to get a Reverse Mortgage at age of 55

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Key Benefits of a HECM

Increased
Cash Flow

You can access cash from a portion of your home equity without incurring income tax* (generally, it won’t affect your Social Security and Basic Medicare benefits). You can use the funds how you want. 

* This advertisement does not constitute tax advice. Please consult a tax advisor regarding your specific situation.

Flexible
Repayment Feature

You have the option to repay as much or as little of the loan balance each month as you would like, or you can make no monthly mortgages payments at all. Of course, you must still maintain the home and pay homeowners insurance and property taxes, just like a traditional mortgage.

Non-Recourse
Feature

The FHA guarantees that if the balance on the loan exceeds the home value at the time the home is sold, neither you nor your heirs will be responsible for paying the deficit (the FHA will pay it). If there are excess proceeds from the sale of your home, you (or your heirs) would receive them.

HECM INformation

Ways Loan Proceeds Can Be Taken:
  • A lump sum.
  • Fixed monthly payments for the life of the loan, or a set period of time.
  • A line of credit.
  • Or a combination line of credit and monthly installments.
General Eligibility:

The borrower(s) must:

  • Be 62 years or older*
  • Live in the home as his or her primary residence and either own the home outright or have significant equity in the home
  • Meet minimum credit and property requirements
  • Must receive reverse mortgage counseling from a HUD-approved counseling agency
  • Must not be delinquent on any federal debts

*Some programs allow you to get a Reverse Mortgage at age of 55

Eligible Property Types:
  • Single family residence.
  • 2- to 4-unit properties.
  • Manufactured homes.
  • Modular homes.
  • Planned unit developments.
  • Townhomes.
  • FHA-approved condominium.

Common Uses of a HECM Mortgage

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Refinance your current mortgage.

Refinancing your current mortgage into a reverse mortgage eliminates your obligation to make required monthly mortgage payments. You must maintain the home and pay your homeowners insurance and property taxes.

Supplement cash flow with a steady stream of funds.

A reverse mortgage allows you to access your equity as a lump sum, monthly payments, a line of credit, or a combination. Use that to help fund the FUN in retirement.

Bridge the Medicare gap.
You can use a HECM to Bridge the Medicare gap from age 62 to 65.
Use as a standby line of credit.

If you choose the line of credit option you have a safety net for peace of mind. Also, the unused portion of the line of credit can grow!

Fund major expenses.

Use the funds from your reverse mortgage to take the trip you have always wanted to.Use it to finally remodel the one part of your home you always wanted to. The possibilities are endless.

Debt consolidation.

You can use the funds from a HECM to pay off high interest debt, or consolidate your debt into one place. Then your other monthly income sources can go further and life can become more enjoyable.

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You probably
have questions...

Here are just a few questions we get, you can view more FAQ’s by clicking below.

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How does a HECM Work?

With a Home Equity Conversion Mortgage (a.k.a. reverse mortgage), you borrow against your home equity — the lender pays you an advance on a percentage of your home equity.

What is the interest rate on a HECM loan?

Reverse mortgage interest rates can vary by lender and whether you select a fixed or variable product. The variable interest rate is composed of two parts: an index and a lender margin.

Who qualifies for a HECM?

  • Be 62 or older
  • Own your own home as your primary residence
  • Have significant equity in the home
  • Meet minimal income and credit requirements
  • Attend a financial counseling session

Is a HECM a second mortgage?

No. A Home Equity Conversion Mortgage must be in the first lien position.

How is a HECM repaid?

When a maturity event occurs (e.g., the home is no longer the primary residence of the at least one borrower or a non-borrowing spouse), the loan becomes due and payable, and the home is typically sold to repay any outstanding loan balance. Because reverse mortgages are non-recourse loans, the sale of the home after loan maturity will always satisfy the loan repayment obligation — neither the borrower nor their heirs will be personally liable for any balance deficiency.

Free Consultation

Over the phone we can ask you a few questions and get some basic financial information and give you the information necessary in order to see how a reverse mortgage could improve your situation.

Free Reading Material

You can fill out the form to the right and we can send you some reading material you can review.