A reverse mortgage is also known as a Home Equity Conversion Mortgage, abbreviated as HECM, pronounced “heck-um”. The HECM program is insured by the U.S. Federal Government. The Federal Housing Administration (FHA) insures these loans which enables homeowners age 62 and older to withdraw some of the equity in their home as tax-free money. The loan is called a reverse mortgage because instead of making monthly mortgage payments to the lender, the lender provides money to the client with no monthly mortgage payment required.
The main requirements are as follows:
- The borrowers must own and occupy the property as their primary residence
- The property must have a sufficient amount of equity
- The borrowers cannot be delinquent on any federal debt
- The borrower must be at least 62 or older to qualify
You will remain responsible for payment of taxes, insurance and maintenance of the home for the duration of the loan. Repayment of principal and accrued interest is made when you sell or move out of your home permanently. Fees to obtain a reverse mortgage loan include an appraisal, origination fee and closing costs.
Below are the product choices available.
The HECM Fixed rate option is designed for people requiring a greater amount of money available to them to pay for mandatory obligations like their current mortgage balance, property liens, repair requirements and reverse mortgage loan closing costs. You will receive your money in one lump sum at closing and the low fixed rate remains the same through the life of the loan.
The HECM Line of Credit rate reverse mortgage is available to everyone that qualifies and offers different ways to receive money available to you. One option offers lower closing costs by limiting your initial money disbursement for the first year based on the FHA pre-determined limit. Other options include receiving your money in smaller amounts monthly, a full draw on your line of credit at closing, accessing your line of credit when you need to or any combination of these. Another great benefit of this option is your unused line of credit may grow over time.
A HECM for Purchase allows you to finance the purchase of a home using a reverse mortgage. There are no monthly mortgage payments. This option gives seniors the chance to find a home that meets their needs or move closer to family. Please contact a reverse mortgage expert for more information on the HECM for Purchase loan program.