Home Equity Conversion Mortgage (HECM)
What is a Home Equity Conversion Mortgage?
It’s a mortgage that allows homeowners 62 years and older to access a portion of the equity in their homes for use in retirement. HECMs are insured by the Federal Housing Administration (FHA). Note that not all reverse mortgages are federally insured.
What Are The Benefits of a HECM loan?
A HECM from HMAC Team Cal Point Mortgage can provide you with the following benefits:
- You can stay in your home — you don’t need to sell it for access to funds.
- HECM proceeds from the equity in your home is available when you need it and can help you pay bills and other expenses.
- The credit line has a growth factor.
- You can receive your funds as a monthly payment, line of credit, lump sum or as a combination of these.
- After years of paying on your mortgage and building equity, you can finally make that equity work for you.
- This loan can help you with your financial and retirement planning.
Eligible Borrowers and Requirements of a Reverse Mortgage
You must meet the following criteria to be eligible for a reverse mortgage:
- Be at least 62 years old.
- Take HUD approved counseling session (available at little to no cost) and receive a certificate of completion required during the application process.
- Live in the home as your primary residence.
- Current mortgage balance must be low enough that it can be paid off with the HECM proceeds.
HECMs follow FHA property eligibility standards, so your home must be one of the following:
- Single family home
- 2–4 unit home
- A FHA approved condominium
- Manufactured housing (must be on a permanent foundation)
Reverse Mortgage Considerations
Before you apply for a HECM, you must first consult a HUD housing counselor. This will help you determine whether a HECM is right for your situation. Contact us for a list of counseling agencies.
How Repayment Works
Unlike a traditional mortgage in which you make monthly payments, a HECM uses your home equity to provide you with proceeds. The mortgage becomes due when you die, sell your home, or move out. If you pass away, your heirs can pay the loan by selling the home or by refinancing the HECM.
While you don’t have to make monthly mortgage payments, you’re still responsible for property taxes and homeowner’s insurance. You must also keep the home in good condition.