What is a HECM Loan
A Home Equity Conversion Mortgage Loan (HECM) is a federally insured program through the HUD/FHA that allows the borrowers to use the equity in their home to pay for their mortgage. Some still call it Reverse Mortgage but this one is radically different than the old program.
It’s a loan with optional payments.
You maintain full ownership and control of the property.
The family inherits the home and has choices of how to pay the loan back.
The interest on the HECM is added to the balance of the loan and is payable when both borrowers are out of the home.
This is the HUD/FHA Reverse Program.
Available for the following:
- Individuals that are at least 62 years old
- Must have equity in the home of at least 50%. Calculations are based on value and age of younger borrower.
- Individuals must use as primary residence. Travel and having a second home is allowed.
- Can be up to 4 units, includes condominiums and other types of dwellings.
With proceeds from a HECM there are many benefits:
- Stay in one’s home long term without having to make payments (except for insurance and property taxes
- Pay off existing mortgage and eliminating the payment associated with such loan. Dramatically improves cash-flow.
- Payments towards the loan can be made but are not required
- Cover medical expenses
- Renovate/improve home
- Take trips for fun or to visit family
- Invest in a new hobby or business
- Gift or lend money to family
- Help grandkids with college expenses
- Purchase a vacation/second home
- Pay for in-home care
- Purchase insurance for various needs (long term care, dental)