Your friends might have one. Your sister has one. Even your smart-alecky brother has one and he raves about it. The television commercials make it sound too good to be true. You ARE the sharpest tool in the shed and yet, you just don’t get it. Let’s break down what a reverse mortgage is so you too can share your glorious stories at this year’s holiday table!
A reverse mortgage is a loan against the equity of a home. Rather than having your equity (the difference between what you owe and what your home can sell for on the open market) not benefiting you while you own your home, a reverse mortgage gives you the opportunity to access and enjoy your equity now. A reverse mortgage can provide a lump sum of your available equity, cash advances, or monthly payments to you all requiring no repayment until such time as you no longer live in your home.
HECMs, or “Home Equity Conversion Mortgages” (pronounced as ‘heck-um’), are FHA insured loans. You may recall FHA loans as those loans requiring a low down payment for homebuyers so that more folks can realize the American dream of homeownership. HECM loans are available as a refinance of your primary property or for the purchase of a home.
What is the big deal about being FHA insured? With FHA insurance you are guaranteed that even if the lending source you obtained your HECM thru were to go to out of business, your HECM credit line remains available. You can securely plan your future receipt of your equity proceeds.
How is a Reverse Mortgage different from a traditional mortgage? There isn’t a credit score requirement and there aren’t qualifying ratios you must meet. What is considered is the maintenance of your credit history (not scores), your property payment history, and your residual income (the amount of monies available to you to cover the costs for homeowner’s insurance, property taxes, etc).
What happens when the HECM loan becomes due? Your HECM will become due when you no longer live in your home as your primary residence. At that time you or your heirs can refinance your home to pay off the HECM balance or the home can be sold. Your home remains your home including keeping title! If the loan balance owed is less than the home value, you or your heirs receive the difference. Your equity is not lost.
To see what you might qualify for or if you are interested in the HECM for Purchase program please complete the secure interest inquiry form on our Home Page.