Home Equity Conversion Mortgages for Seniors
If you are 62 years or older, a homeowner and have significant equity in your home, you may be eligible for a Home Equity Conversion Mortgage (HECM) loan, commonly known as a reverse mortgage. The HECM is the only reverse mortgage insured by the U.S. Federal Government and is only available through FHA approved lenders.
HECM’s can be very helpful financial tools for those who are eligible. In addition to being at least 62 years old, some additional borrower requirements include:
- Can not being delinquent on any federal debt
- Must attend a session with a HUD-approved HECM counselor
- Owning the property outright, or at least having paid off a considerable amount of your mortgage
- Occupying the home as your primary residence
- Have financial resources to continue to make timely payment of ongoing property charges such as property taxes, insurance and Homeowner Association fees, etc.
The following eligible property types must meet all FHA property standards and flood requirements:
- Must be a Single family home or 2-4 unit home with one unit occupied by the borrower
- A HUD-approved condominium project
- Manufactured home that meets all FHA requirements
Frequently Asked Questions About HECM Reverse Mortgage
A home equity line of credit, borrowers must make monthly payments on the principal and interest. A reverse mortgage is different; there are no monthly principal and interest payments. With a reverse mortgage, you are required to pay real estate taxes, utilities, and hazard and flood insurance premiums.
For adjustable interest rate mortgages, you can select one of the following payment plans:
Tenure- equal monthly payments for a fixed period of months selected.
Term- equal monthly payments as long as at least one borrower lives and continues to occupy the property as a principal residence.
Line of Credit- unscheduled payments or in installments, at times and in an amount of your choosing until the line of credit is exhausted.
Modified Tenure- combination of line of credit and scheduled monthly payments for as long as you remain in the home.
Modified Term- combination of line of credit plus monthly payments for a fixed period of months selected by the borrower.
For fixed interest rate mortgages, you will receive the Single Disbursement Lump Sum payment plan.
Single Disbursement Lump Sum – a single lump sum disbursement at mortgage closing.
All proceeds beyond the amount owed belong to your spouse or estate. All the cash, interest, and other HECM finance charges must be repaid, then any remaining equity can be transferred to heirs. No debt is passed along to the estate or heirs.
Typically, reverse mortgage loan funds are not subject to income tax. Contact your tax advisor for additional details.
The amount you can get from your home varies by borrower and depends on the age of the youngest borrower or eligible non-borrowing spouse the current interest rate; and the lesser of appraised value or the HECM FHA mortgage limit of $625,500 or the sales price. If there is more than one borrower and no eligible non-borrowing spouse, the age of the youngest borrower is used to determine the amount you can borrow.