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Home Equity Conversion Mortgage (HECM)
Also known as the " Reverse Mortgage"
 
What is a Reverse Mortgage?

• A Reverse Mortgage is an FHA loan available to people over 62 years of age who live in the home as their primary residence.
• The loan amount is based on the FHA appraised value of the home and the age of the youngest borrower. Maximum value of up to $765,600 is used in the calculation.
• There are no required monthly principal and interest payments. (Borrowers must still pay homeowners insurance, taxes, and any other related costs such as Homeowners Association Dues.)
• The loan is repaid when the last of the borrowers  move from the property, sell the property, transfer the title, or die. Foreclosure can occur if taxes or insurance are not paid, if the property is not maintained in accordance with FHA guidelines, or the borrowers fail to meet their obligations of the loan.
• The borrower retains title to the property.
• Funds from a reverse mortgage are not considered income and therefore are not taxable.*                          

             *Consult your tax advisor.

• The reverse mortgage is a non-recourse loan. Repayment of the loan is the responsibility of the borrowers if still alive, and of the estate if the borrowers have died. Repayment is limited to the appraised value of the property at the time the loan is repaid, up to 95% of the appraised value.

 

​What are the qualifications for a Reverse Mortgage?

• All borrowers must be 62 years old or older.
• All borrowers must attend a counseling session with a HUD-approved counselor.
• There is no credit score requirement.
• The property must be properly insured and pass an FHA appraisal inspection.

 
What Properties are Eligible?
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     ●    Single Family Homes
     ●    2-4 unit multi-family properties. Borrowers must live in one of the units.
            (2-4 unit properties are not eligible for the HECM for purchase program.)
     ●    Condominiums must be an FHA-approved project.
     ●    Townhomes
     ●     Manufactured homes that meet FHA-approved manufactured home guidelines. 

Why Choose a Reverse Mortgage?

• Pay off an existing mortgage or credit cards
• Medical expenses
• Purchase of Long-Term Care Insurance
• Supplement Social Security income for day-to-day living expenses
• Home improvements, modifications, additions
• Provide for a more comfortable and enjoyable retirement
• Purchase of a new home, condo, vacation home, etc.

 
What are My Reverse Mortgage Options?
Borrowers can choose the way they receive reverse mortgage proceeds that meet their financial plans and needs.

• A lump sum
• A line of credit
• Monthly payments
• Any combination of the above

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Payment Options
There are at least 5 ways to receive ongoing reverse mortgage payments. 
This gives you the  flexibility to choose the right option for your unique circumstances. 

 
  ❶       Line of Credit**
 ❷    Term      (Monthly Payments to You for a Fixed Period)**
 ❸      Tenure    (Monthly Payments to You as Long as You Live in the Home)**
  ❹      Modified Term       (Term and Line of Credit Combination)**
  ❺      Modified Tenure    (Tenure and Line of Credit Combination)**
  
​You have the option to change plans after closing. There is a fee and you must still have available funds and be in compliance with all reverse mortgage  requirements.
   **As always, you must continue to own and occupy as your primary  residence,         continue to pay property taxes and insurance, and maintain the property.                  

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 Can I Purchase a Home with a Reverse Mortgage?
Yes-Using the HECM for Purchase Program


Why Purchase with a Reverse Mortgage?
   •  Transition from multi-story home to single story 
   •  Downsize or Upsize 
   •  Move into 55+ community
   •  Less Yard, Less Maintenance
   •  Relocate closer to kids and grandkids
   •  Closer to shopping, medical, etc 

 What Property Types are Eligible?
    •  Single Family Residence
    •  HUD Approved Condo
    •  Townhouses
     

Can I Make Payments  on a Reverse Mortgage?
You can make a full or partial repayment at any time with no prepayment penalty.

Which lender should I choose?
The simple answer is the one you feel most comfortable with. Look for a lender with many years of experience in reverse mortgage lending and a loan officer that specializes in the field.

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Simplify the Process

George Stewart has been a Reverse Mortgage Consultant in SC since 2002 and can simplify the entire process. He is a good listener and will try to make a Reverse Mortgage easy to understand. 

HECM

What is a HECM?

​HECM or Home Equity Conversion Mortgage is the FHA insured reverse mortgage product.
It is a loan that enables homeowners 62 and over to convert some of the equity in their homes, without having to sell the home, give up the title or take on a new monthly mortgage payment (principal & interest).
​
❖ Home Equity Loan that provides funds to borrowers based on age and home value
❖ Homeowners normally defer payment of the loan until they
     ●  Pass away
     ●  Sell or transfer title
     ●  Permanently move
❖ Should Not affect Social Security or Medicare benefits
❖ May affect SSI and Medicaid (consult with appropriate government agency)
​❖ Borrowers continue to be responsible for property taxes, homeowners
insurance, home maintenance and all property charges (HOA dues, etc.)

Borrower Eligibility
❖ 62 or older
❖ Own and occupy the property as the principal residence 
❖ Complete a HECM Counseling session

Property Eligibility 
❖ Single family homes
❖ 2-4 family dwelling
❖ FHA approved condominiums
❖ Manufactured housing that qualifies under FHA guidelines 
❖ All properties must meet FHA property standards and flood requirements
❖ Must be the primary residence

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HECM For Purchase

What is a HECM for Purchase or H4P?

​It is a  financing option specifically for home buyers who are age 62 and older that may help you get the funds you need to buy the home you want.

Unlike a traditional mortgage, there are no monthly principal and interest payments, which can help boost your cash flow. You own the home as long as you live in it. 

It enables you to purchase a home by combining a one-time investment of funds with loan proceeds from a HECM to complete the transaction. The home you are purchasing secures the loan.

The loan is due when you:

• Pass away
• Sell the home 
• Move or transfer title
• Fail to meet the borrower responsibilities

​

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Borrower Responsibilities

• Property Taxes
• Homeowners Insurance
• Home Maintenance
• Other property charges (HOA Fees, etc.)

Eligible Properties

• Single Family Homes
• Townhomes
• FHA Approved condominiums
• Must be the Primary Residence

​Required Before Application​

• Sales Contract-No seller concessions allowed
• HECM Counseling Certificate
• Certificate of Occupanc

How does it work?

The HECM for Purchase program requires an up-front investment (down payment) from the buyer of about 45% to 55% of the purchase price. The down payment must come from assets you already own-such as money from the sale of a current home or investment or funds you have in a checking, savings, CD, or retirement account. The funds cannot be borrowed.

​How is it different?
​

HECM for Purchase
Requires no montly principal and interest payments throughout the life of the loan.* Interest and fees are added to the balance so that it increases over time, rather than decreasing. 
​

Traditional Mortgage
​Limits the amount you have to invest up front, and lets you build equity over the life of the loan. However, the monthly principal and interest payments reduce your cash flow, and could be an unwelcome financial burden.
​

Jumbo Reverse Mortgage

What is a Jumbo Reverse Mortgage?

​It is a  proprietary reverse mortgage that can offer more funds for higher value homes. It may be a better option for homes appraised above the HECM lending limit of $765,600. I have an assortment of Jumbo products to choose from including a second mortgage option.
​
​Jumbo Reverse Mortgage vs HECM:
​

 Jumbo Advantages 

• More Access to Funds (up to $4 million depending on the lender)
• Lower Age Eligibility (as low as age 60 with at least one lender)
• No Mortgage Insurance Requirement (lower up-front costs)
• More Condos Qualify (no FHA approval required depending on lender and appraised value)
• Second Mortgage Jumbo Available

HECM Advantages

• ​FHA Insured Loan
• Protection for Non Borrowing Spouses
• Interest Rates Generally Lower
• More Ways to Access Loan Proceeds