What the Heck is a HECM?

What is a HECM Reverse Mortgage?

A HECM (Home Equity Conversion Mortgage)  reverse mortgage is a loan that enables homeowners and homebuyers age 62* and older, to convert some of their home equity into cash, installment payments, or a line of credit. Some loans also let homeowners finance a new home purchase. With a reverse mortgage, you make no monthly mortgage payments. You continue to live in and own your home as long as you uphold the terms of the loan.

Unlike a traditional home equity loan or Home Equity Line of Credit (HELOC), you don’t have to repay a reverse mortgage until the home is sold or the last surviving borrower (or a non-borrowing spouse who meets certain requirements) no longer lives in the home. The homeowners must maintain the condition of the home and stay current with other property costs, including but not limited to taxes and hazard insurance, or else the loan will be called due.

*The age minimum is different for proprietary loans unless you reside in a state that maintains the minimum at age 62.

How does a HECM work?

• The amount of loan proceeds is determined by the age of the borrower and appraised value of the home.
• A financial assessment determines your long-term ability to pay taxes and insurance.
• Undergo required counseling from a HUD-approved agency to answer questions.
• Loan proceeds pay off your current mortgage.
• Cash can be a lump sum, and you can get the remainder as installment payments or a line of credit. The unused portion grows every month, providing a significant cushion for the future (as long as the loan has not matured or a default has not occurred).
• Don’t forget to continue to pay your property charges, such as taxes and insurance and any homeowners association fees.
• With room in your budget after eliminating monthly mortgage payments and more cash in hand (or a growing line of credit), create the retirement you always wanted.

Am I eligible for a HECM?

To be eligible for a HECM reverse mortgage, you must meet the following criteria:

• You must be age 62 or older.
• The home must be the borrowers’ principal residence.
• The home must meet Federal Housing Authority (FHA) minimum property standards and flood requirements.
• The home must be one of the following property types: single-family home; a two-to-four-unit home with one unit occupied by the borrower; or a HUD-approved condominium. With new construction, you must have a Certificate of Occupancy or equivalent before you apply.
• You must have sufficient home equity. A Reverse Mortgage Specialist from Finance of America Reverse LLC (FAR) can tell you if you have enough home equity to qualify.

In addition to confirming qualifications, our Reverse Mortgage Specialists can help you find out if a HECM is right for your personal situation and understand f the loan details.

How much money can I get?

How much depends on multiple factors, including the age of the youngest borrower or non-borrowing spouse, your home’s value, the amount of equity, FHA lending limits, the current interest rate, and the reverse mortgage product and payment option you choose. Susan Fogel, your reverse mortgage specialist, can give you a free quote that’s tailored to your specific situation.

What are my loan obligations?

The reverse mortgage borrower must meet all loan obligations, including living in the property as the principal residence and paying property charges, including property taxes, fees, hazard insurance, and any homeowners association fees. The borrower must maintain the home. If the borrower does not meet these loan obligations, then the loan will need to be repaid.