Home equity conversion mortgages are called HECMs. A HECM is a reverse mortgage insured by the Federal Housing Administration that allows qualified homeowners 62 and older to access a portion of the value of their homes. Taking advantage of home equity can provide greater cash flow to the borrower in a variety of ways. Imagine a world in which you would be able to live comfortably in your home without a mortgage payment every month, or receiving monthly proceeds from your home equity loan. You don’t have to start repaying a reverse mortgage until the home is sold, you pass away or you permanently leave the home. To avoid defaulting on a loan, borrowers must also keep their homes in good condition, pay property taxes, and maintain homeowner’s insurance coverage. Visit our reverse mortgage page for HECM guidelines.
Reverse mortgages are mortgages designed for homeowners 62 and older. In addition to enjoying the freedom and comfort of your home you have known for so many years, you might enjoy a portion of the value of your home. It’s your home, now you can put it to work for you.
Borrowers of reverse mortgages retain ownership and title to their homes. It’s yours just as it always was, but now you are able to tap into the equity you’ve built up over the years. Additionally, HECM (Home Equity Conversion Mortgage) reverse mortgage loans give you peace of mind since the only assets that are securing the loan are your home and property.
Loans under the HECM program are insured by the Federal Housing Administration (FHA). At closing and throughout the life of the loan, an FHA Mortgage Insurance Premium (MIP) is collected. Mortgage insurance premiums are added to the loan balance at closing. During closing, you will be charged a Mortgage Insurance Premium (MIP) based on your home’s appraised value up to $970,800 (the national lending cap for 2022). For ongoing FHA insurance, monthly loan balances are used to calculate the premium.
For borrowers and their children, this policy offers the following protections:
The heirs of the home may keep the home when the reverse mortgage becomes due by paying 95% of its appraised value, less customary closing costs and real estate commissions.
Your home’s value can be accessed with a reverse mortgage without having to sell it.
You live in a home that has appreciated in value over the years. Healthcare costs may be challenging for you. Suppose you have to choose between selling your house – your home, which has no price tag – or continuing to live in it and watching your debts pile up. Imagine the situation resolving itself.
“My house has been my home for most of my life. I can’t leave, but I can’t afford to stay.”
You can receive monthly cash flow payments if you obtain a reverse mortgage. You can borrow a portion of the value of your home without having to sell it. When you sell your home, the last borrower passes away, or you stop living in the house, the loan is repaid.
Loan proceeds can be used for a variety of purposes like enhancing and extending your retirement, making home improvements, paying bills, etc. The choice is yours.
Prior to incurring any costs associated with the loan (aside from the counseling fee), all those seeking reverse mortgages are required to obtain counseling (from an independent third-party counselor approved by HUD). Even though reverse mortgage proceeds are not taxable, borrowers should seek tax advice about how they might affect government assistance programs such as Medicaid and Medi-Cal.
¹This advertisement does not constitute financial advice. Please consult a financial advisor regarding your specific situation. There are some circumstances that will cause the loan to mature and the balance to become due and payable. Borrowers are still responsible for paying property taxes, homeowner’s insurance and maintaining the property to HUD standards. Failure to do so could make the loan due and payable. Credit is subject to age, income standards, credit history, and property qualifications. Program rates, fees, terms, and conditions are not available in all states and subject to change.
²Borrowers should seek professional tax advice regarding reverse mortgage proceeds.
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