When a homeowner becomes age 62, they in turn become eligible for a HECM loan.  In this HECM FAQ we will answer many questions pertaining to the HECM loan.  It makes sense to first address the question “what is a HECM loan?”.  With that said, let’s dive in.

What Is A HECM Mortgage?

HECM is an acronym for Home Equity Conversion Mortgage and is otherwise known as a reverse mortgage.  However, there is more than one type of reverse mortgage.  The HECM loan or HECM mortgage is a very specific type of reverse mortgage that is insured by FHA / HUD.  The HECM mortgage allows homeowners aged 62 plus to access a portion of their home equity and convert it to usable money.  The best part about it is that you don’t have to make a monthly mortgage payment for life or until you move out of the HECM home permanently.  That said, you still own the home and will therefore need to maintain property taxes, insurance, and any other homeowner association type dues. 

What Are the Basic HECM Requirements?

To be eligible for a HECM loan, you have to be aged 62 or older, live in the home as your primary residence, and have sufficient equity.  If you are married, just one of you needs to be aged 62 plus.  These are the most basic HECM requirements and there are other credit and income requirements to get this loan.  However, this loan is easier to qualify for than a traditional home loan because there are no debt to income requirements. Further, the credit requirements are more lax as well.

More questions? Want a free info kit? Contact us  Info@ReverseMortgageLoanAdvisors.com

Are There Reverse Mortgages for People Are NOT Age 62 Yet?

Yes, you can do a reverse mortgage at age 60 in some states.  However, this is NOT an FHA insured program.  It’s what we call a portfolio program.  The good news is, it’s also a non recourse loan just like a HECM loan.  This program also tends to have lower fees than the HECM mortgage.  It is however, more conservative in terms of how much you can borrow.

What if We Still Owe Money On A 1st or 2nd Mortgage?

You may still be eligible. Proceeds from your HECM would first be used to pay off any existing mortgage or mortgages. This would eliminate any monthly mortgage payments associated with those loans.  The left over proceeds can be used however you like (unless you need a tax and insurance set aside).

How Much Money Can I get?

The specific amount depends on several factors, including your age, the type of the HECM you select, the value of your home, prevailing interest rates and Federal Housing Administration (FHA) lending limits.

More questions? Want a free info kit? Contact us  Info@ReverseMortgageLoanAdvisors.com

HECM Loan VS Other Home Equity Based Loan Options

A HECM Mortgage offers advantages that provide A higher level of flexibility and financial control:

  1. A HECM Loan has a line of credit feature.  The amount available that you have not used yet actually has a growth feature.  Ultimately, your available credit grows for as long as you don’t touch it.  This feature is unique to HECM Mortgages and not available with a traditional line of credit.
  2. HECM loans have a flexible payment feature.  Technically, you don’t need to make a payment for life or until you move out permanently.  However, you CAN make a payment if you want to.  If you choose to, you can make any sized payment you like. 
  3. A HECM loan’s line of credit can’t be canceled or reduced.  This holds true as long as you meet your loan obligations and live in the home as your primary residence.  Hence, the money / line of credit will be there when you need it.  Regular credit lines can be shut off, reduced, or cancelled at any time for any reason (usually softening real estate market conditions).
  4. With an FHA-insured HECM mortgage, you’re not responsible to pay the difference if the loan balance ever exceeds the value of your home when the loan becomes due.  This is what is known as the non-recourse feature.

More questions? Want a free info kit? Contact us  Info@ReverseMortgageLoanAdvisors.com

How Can I Receive the Money From A HECM Mortgage?

You will have a several ways to get your money.  Put simply, you can receive the funds via lump sum, line of credit, monthly advances, term, or any combination of those.  For a more detailed explanation, visit Reverse Mortgage Payment Options.

Can A HECM Mortgage Be Done On A Manufactured Home?

Yes, a HECM Loan can be done on any manufactured home that meets FHA guidelines.  The home must be built after June 15, 1976.  It also has to have the red HUD label, be 400 square feet or more, be affixed to a permanent foundation, and be taxed as real estate.  The home can be a single wide or double or triple wide.  However, even though FHA will insure these loans, not every lender will do the loan.  This is especially true for single wides.  If you’re told “no” with respect to your home, check several lenders.

More questions? Want a free info kit? Contact us  Info@ReverseMortgageLoanAdvisors.com

Does A HECM Loan Impact My Government Benefits?

The money you get from a HECM generally does not impact your regular Social Security or Medicare benefits. However, certain needs based benefits like Medicaid and Supplemental Security Income can potentially be impacted.

How Can I Use HECM Loan Proceeds?

Homeowners can use the proceeds however they want. For example, you could: refinance your home, consolidate debt, fund large home renovations or simply serve as a reserve line of credit and much more.  It’s totally up to you.  You can even use a HECM to purchase a new home that better fits your needs and wants

More questions? Want a free info kit? Contact us  Info@ReverseMortgageLoanAdvisors.com

Will I Have to Pay Any Upfront Fees?

Most of the fees associated with a HECM can be financed with your loan. There are only two potential out of pocket expenses; the counseling and the appraisal.  The appraiser gets paid whether you do your loan or not.  This fee does need to be paid before the appraiser will come out to your home.  This fee cannot be financed like most of the rest of the fees.  The counseling also has to be paid up front.  However, some counseling agencies will allow you to pay this via closing, BUT if you don’t close they will still expect you to pay them.  Some counseling agencies actually have grant money that can be used to provide you with free counseling.

More questions? Want a free info kit? Contact us  Info@ReverseMortgageLoanAdvisors.com

What Has To Be Paid When the Loan Becomes Due?

When it comes to repayment, you’ll simply have to pay back what you used plus any accrued interest or associated fees like servicing fees.  ***Note, servicing fees used to be common. Then, they went away.  However, now they are back in some cases.  As of 2020, you should be able to get a reverse mortgage HECM loan without any servicing fees. 

Homeowners (or their heirs) typically elect to settle the HECM through the sale of the home. Repaying the loan with other assets or by refinancing through a conventional mortgage is also an option, if you or your heirs want to keep the home.

More questions? Want a free info kit? Contact us  Info@ReverseMortgageLoanAdvisors.com

What If One of the Married Borrowers Passes Away or Has to Move Out?

The other borrower continues to own and live in the home and enjoy all the benefits of their HECM Loan.  As with any home secured loan or mortgage, borrower must meet their loan obligations, stay current with property taxes, insurance, maintenance, and any homeowners association fees.

If we did not cover a question you may have, perhaps it’s covered in this blog post à HUD Reverse Mortgage FAQ.

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More questions? Want a free info kit? Contact us  Info@ReverseMortgageLoanAdvisors.com

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