Reverse Mortgages / (HECM)

HECM (pronounced; Hek-Um) stands for Home Equity Conversion Mortgage.

HECM is a Federal Housing Administration's (FHA) reverse mortgage, which allows borrowers to withdraw a portion their home’s equity.  HECM provides withdrawal options either as a Fixed Monthly Amount, a Line of Credit, or a Combination of Both.

Funds from HECM, can be used to purchase a primary residence, providing you are able to use cash on hand to pay the difference between the HECM proceeds and the Sales price plus closing costs for the property you are buying.

To Qualify for a HECM, you must:

  • Be 62 years of age or older.
  • Own the property outright or have a small mortgage balance.
  • Occupy the property as your principal residence.
  • Not be delinquent on any federal debt.
  • Participate in a consumer information session given by an approved HECM counselor.

The following eligible property types must meet all FHA property standards and flood requirements:

  • Single family home or 1-4 unit home with one unit occupied by the borrower.
  • S. Department of Housing and Urban Development (HUD) approved condominium.
  • Manufactured home that meets FHA requirements.

The Home Equity Conversion Mortgage (HECM) for Purchase allows seniors at least 62 years of age to purchase a home through a reverse mortgage. This can be a valuable option for seniors who need a new home that better meets their physical needs, or who wish to move closer to family members. Since this is a reverse mortgage product, monthly payments are not made on the new house.

Unlike the traditional reverse mortgage, HECM for purchase loans require a down payment, which you must pay with your own cash.  Typically the down payment required is based on the borrower’s age.  The older the borrower is, the lower the down payment requirement will be. HECM for purchases are subject to the same guidelines as a standard HECM loan.

A reverse mortgage is a loan available to seniors over the age of 62 which allows them to convert equity in their home into cash. These loans were created to give seniors access to cash for expenses such as home improvements, unexpected medical costs, and in-home care by utilizing the accumulated equity in their homes.

This type of loan is called a reverse mortgage because instead of the borrower making monthly payments to their lender as they would with a traditional mortgage, the lender makes payments to the borrower. Unlike a traditional home equity loan or second mortgage, a reverse mortgage does not have to be repaid until the borrower no longer occupies the home as their primary residence.

The most common reverse mortgage is the Home Equity Conversion Mortgage (HECM) which is insured by the FHA. An alternative option is the Proprietary Reverse Mortgage which is not backed by the federal government.

 

What is a Reverse Mortgage?

Reverse mortgages are loans only available to persons 62 years of age and older, that converts their  Equity in their home into cash. A reverse mortgage can also be used to purchase a home.

How can I use the money I receive from a reverse mortgage?

There is no restriction on how the proceeds from a reverse mortgage can be used.

How can I qualify for a reverse mortgage?

To qualify for a reverse mortgage a borrower must be at least 62 years old, own a home, and have sufficient equity in that home.  A lender will also complete a financial assessment of the borrower.

Will my home qualify for a reverse mortgage?

Single-family homes, 2-4 unit properties (one unit occupied by owner), FHA-approved manufactured homes, HUD approved condominiums, and townhomes are eligible for a reverse mortgage.

How much money can I get from a reverse mortgage?

The amount will vary borrower to borrower and is based on a few factors including age of the youngest borrower, current interest rates, value of your home, and how much you may owe on an existing mortgage