We get a number of questions about the HECM every day. The decision to get a HECM is a big one and requires as much information as you can get. We’re here to help you feel confident with your options. That’s why we’re answering 10 popular questions about the HECM.
What is a HECM?
HECM is short for Home Equity Conversion Mortgage. Also known as a reverse mortgage, the HECM is a loan that allows you to access the equity in your home.
What type of HECMs are there?
There are three HECM products to help better suit your needs. The fixed rate option keeps the interest rate the same from the time of closing. The adjustable rate loan may increase or decrease the interest rate throughout the life of the loan. The HECM for purchase allows clients to purchase a home without the required monthly mortgage payments for as long as they live there. They only need to pay their property taxes, homeowners insurance, and home maintenance costs. For more information on each type of loan, please visit our HECM products page.
Am I eligible for this loan?
If you are a homeowner who is 62 or older and have enough equity in your home, you may qualify for a reverse mortgage. Currently, credit score is not a determining factor, though credit history is reviewed to see if there are additional requirements.
How can I use a HECM?
HECM proceeds can be used for anything you like. Some people use them for such immediate needs as consolidating debts, traveling, making home improvements, and increasing their monthly cash flow savings. Others use it for planning for the future by using proceeds to live off while allowing other retirement assets to grow in value. Proceeds can be put into a line of credit that is accessible anytime and any available proceeds increase over time.
Can I get one if I already have a mortgage?
Yes. You can get a HECM if you have a mortgage or if you own the home free and clear. One of the benefits of this loan is that it first pays off your existing mortgage and no monthly payments are required as long as you live in the home and continue to pay your property taxes, homeowners insurance, and home maintenance costs. After you use the HECM to pay off your existing mortgage, the remaining proceeds are yours to use however you want.
Do I need to repay a HECM?
The HECM is a loan, and just like any other loan, it will need to be repaid eventually. The good news is that you do not need to pay off the loan until it comes due – when you move out of the home, sell it, or pass away. While monthly payments are not required, you can make payments if you want and there are no prepayment penalties if you do pay it off early.
How will this loan affect my heirs?
When you have an effective financial tool and are able to change the way you live your retirement, your heirs can have peace of mind. Many people worry about what will happen to the house and the loan when they pass away. If you pass away and the loan comes due, heirs have a few options. They can sell the home, purchase the home, or walk away from the home. For more information on each option, call one of our licensed specialists.
What are my responsibilities?
You will remain the owner of the home, so you will still be responsible for paying your property taxes and homeowners insurance. You must also maintain the home and pay for any expenses that maintenance may require.
Where can I get more information?
We provide a number of ways to get information. Explore our website to find more information about the HECM and the different types of products we offer. Peruse our blog to find a number of articles on this product and how you can use it in retirement. You can also request an information kit that includes two informational guides and a DVD that features our CEO and a couple of our licensed specialists.
How can I get a HECM?
The first step is calling a licensed specialist. They’ll answer your questions and see if you qualify. Once you are ready to move forward and receive your application, your licensed specialist will walk you through it. After the underwriting process, you’ll close your loan.