A Home Equity Conversion Mortgage (HECM) is a government-insured reverse mortgage and is only intended for those over the age of 62. Reverse Mortgages allow a senior to access a portion of their home's equity and use the proceeds however they choose. The senior retains the home’s title, and no monthly mortgage payments are required as long as they continue to live in the home and meet the terms of the financing agreement.
Single-family residences, 2 to 4 unit homes, modular, planned unit developments, and many condominiums are eligible. Manufactured homes may also be eligible. You can also use the proceeds to purchase a new primary residence.
The senior must be able to make a down payment from an acceptable source of funds. The down payment is determined by the home value minus the amount of proceeds received from the reverse mortgage. The reverse mortgage does not require monthly mortgage payments and features limited credit qualification.
Home loan advances from a reverse mortgage are generally not considered taxable income by the IRS, but you should always consult a tax professional for official answers.
The reverse mortgage loan remains active as long as at least one senior lives in the home as a primary residence and meets the terms of the financing agreement. The senior must maintain the property in good repair and pay ongoing property insurance, tax assessments, and HOA dues. HECM loans never incur prepayment penalties.
Don’t let yourself be fooled by the following common Reverse Mortgage misconceptions:
- Reverse mortgages are only for seniors who are poor
- The senior sells the house or otherwise gives up title to the lender
- Reverse mortgages are expensive
- The senior is losing home equity over time
- The senior or the family will be left with a large mortgage debt at the end
- The senior can never sell the home
If you feel that a reverse mortgage might fit your lifestyle, reach out to a local Loan Officer today!