Consider this untapped asset - The Home Equity Conversion Mortgage (HECM), also known as a "Reverse Mortgage" Loan
More than one million seniors have used a Home Equity Conversion Mortgage (HECM) loan to retain ownership of their homes (contingent on complying with loan terms) while helping them enjoy a more secure retirement, using the extra cash to supplement their retirement savings.
The Home Equity Conversion Mortgage
(HECM) is FHA's reverse mortgage loan program,
which enables you to withdraw some of the
equity in your home. The HECM can be a smart financial tool that can give older Americans greater financial security.
Many seniors use it to supplement Social
Security, meet unexpected medical expenses,
make home improvements and more.
To be eligible for a FHA HECM, the FHA re-
quires that you be a homeowner 62 years of age
or older, own your home outright, or have a low
mortgage balance that can be paid off at closing
with proceeds from the reverse loan, have the
financial resources to pay ongoing property charges
including taxes and insurance, and you must live
in the home.
The differences between a reverse mortgage and a
home equity loan is with a second mortgage, or a
home equity line of credit, borrowers must make
monthly payments on the principal and interest.
A reverse mortgage is different, because it pays
you – there are no monthly principal and interest
payments. With a reverse mortgage, you are
required to pay real estate taxes, utilities,
hazard & flood insurance premiums and maintenance costs.
A reverse mortgage is a special type of
home loan that lets you convert a portion of the equity in your home into cash. The equity that you built up over years of making mortgage payments can
be paid to you. There are minimal income and credit requirements necessary to qualify for a Reverse Mortgage.
How much money can I get from my
The amount varies by borrower and
depends on: Age of the youngest borrower or
eligible non-borrowing spouse Current interest rate; and
Lesser of appraised value or the HECM FHA mortgage limit of $636,150 or the sales price
When the reverse mortgage loan does become due, the borrower’s heirs/estate typically have six months, with two, 3-month extensions in which to choose to repay the reverse mortgage loan and keep the home or put the home up for sale in order to repay the loan. If the home sells for more than the balance of the reverse mortgage loan, the remaining home equity passes to the heirs. Lender's are required to give the heirs/estate the option to satisfy the reverse mortgage by paying 95% of the homes present appraised value.
If the home sells for less than the owed balance, the estate is not required to pay more than the value of the home at the time the loan is repaid.
A reverse mortgage loan is “non-recourse”, meaning that if you sell the home to repay the loan, you or your heirs will never owe more than the loan balance or the value of the property, whichever is less; and no assets other than the home must be used to repay the debt.