Home Equity Conversion Mortgage (HECM)
HECM is the commonly used acronym for a Home Equity Conversion Mortgage, which is a reverse mortgage insured by and regulated by the Federal Housing Administration.
What is a Reverse Mortgage?
A Reverse Mortgage allows seniors age 62 or older to convert the equity in their home into cash without ever having to make a monthly mortgage payment. It’s called a Reverse Mortgage because it amortizes in reverse. That is, its balance grows over time because you aren’t required to make any monthly payments. When you no longer live in the home or otherwise choose to pay off the mortgage, you’ll owe whatever you borrowed plus unpaid interest and mortgage insurance fees.
It works the same way as a regular mortgage, however you will never be asked to make a monthly payment. You still own title to the home, you still pay taxes and insurance on your residence, and when you pass away you still leave your home to your heirs. And like a regular mortgage, if you convey title, for instance by passing away or selling, you have to pay off the mortgage.
What Options do I have to get my equity?
Reverse Mortgages allow you to tap the equity in your home without making a monthly mortgage payment. Depending on your age, home value and equity, you may be able to access that equity in the form of cash. This can be delivered to you in one of four ways:
- Lump sum at closing. Cash to you after the loan closes.
- Receive funds as a monthly payment to you for either a set period of time or lifetime, depending on your needs.
- Maintain funds as a Line of Credit where you can draw money as you need it, when you need it, in an amount you control. The unused Line of Credit will grow every month increasing the amount of money available to you regardless of your current property value. The “Growth feature” creates a wonderful hedge against inflation and property fluctuations.
- Any combination of the above.
- You can change your options as frequently as you like. This is truly the mortgage of choice and flexibility!
Our Loan Officers can help you explore the options available to you since the HECM has multiple options for borrowers to receive benefits.