What is a HECM (Equity Access) loan?
HECM, Home Equity Conversion Mortgage, is a FHA insured, HUD regulated mortgage that allows qualified homeowners 62 and older to access part of the value (Equity) of their home. Home equity can be accessed in a number of ways and enables greater cash flow to the borrower. Imagine no monthly mortgage payment, or instead, enjoying monthly loan proceeds from the years you’ve invested in your home!
With an equity mortgage on your primary residence, repayment is not due until the home is sold, the last borrower passes away or permanently leaves the home. Hard to believe!
This unique mortgage is designed to help you enjoy access to part of your home value with the freedom and comfort it’s provided for so many years.
It’s your home, now you can put it to work for you!
As with most mortgages, borrowers are required to pay property taxes, have homeowner’s insurance coverage and maintain their home to avoid the loan becoming due and payable.
For HECM guidelines, please view our equity mortgage page.
Features and Benefits
Borrowers retain ownership and title to their home.
It’s yours just as it was before however now you may benefit from the equity that’s been building in your home for years. Additionally, you have peace of mind since your home is the only asset that secures the loan.
This loan is insured by the Federal Housing Administration (FHA). A required FHA Mortgage Insurance Premium (MIP) will be due at closing and during the life of the loan. These premiums are charged to the borrower's loan balance. The upfront Mortgage Insurance Premium (MIP) is calculated using your home's appraised value or a maximum of $822,375 (the national lending limit cap) and is charged at closing. The ongoing FHA insurance premiums are calculated using each month's outstanding loan balance.
This insurance provides the following protections and peace of mind for borrowers and their children:
- The borrower(s) / heirs are not required to pay more than the home’s fair market value when the loan comes due. If the loan balance exceeds the value of the home, FHA reimburses the lender for the difference.
- Payments made to the borrower by the lender are insured by FHA. If the lender is unable to continue making payments, the payments would be made by FHA.
- If the loan balance grows and exceeds the home’s present market value, the lender cannot take title.
- FHA insures that borrowers can live in their home as long as basic loan obligations are met (homeowner’s insurance in force, property tax payments current, and the home is maintained in good condition).
If the borrowers pass and the estate (heirs) wishes to retain the home, the estate would have to pay the amount used plus any interest due. If they wish to sell it, they can and would be entitled to any equity remaining minus costs associated with the sale.
If the ending loan balance exceeds the home's value, the estate (heirs) can sign a deed in lieu of foreclosure releasing the property and owing nothing more or, pay 95% of the home's appraised value less customary closing costs & real estate commissions.
It allows you to draw from the value in your home without having to sell it.
You live in a home that you’ve watched increase in value for years. You may find it difficult keeping up with bills and healthcare expenses. You’re faced with a dilemma: sell the house—your home, which really doesn’t have a price tag—or continue to live in it and watch your financial burden increase. Now imagine this dilemma resolved.
“My house has been my home for most of my life. I can’t leave, but I can’t afford to stay.”
Enter The Equity Mortgage
An equity mortgage allows you to draw on a portion of the value in your home without having to sell it and may allow you to receive monthly cash flow payments. The loan is repaid when you sell your home, the last borrower passes away, or you no longer live there as the principal residence.
You can use the loan proceeds as you wish: to enhance and extend your retirement, make home improvements, pay bills, etc. It’s all up to you.*
As a protection, you are required to obtain counseling from an independent HUD-approved third-party counselor, prior to incurring any costs associated with the loan (other than the counseling fee).
It’s important to note that borrowers are required to pay property taxes, have homeowner’s insurance coverage and maintain their home to avoid the loan becoming due and payable.
While proceeds are not subject to personal income taxation, borrowers should seek tax advice on how proceeds may affect government needs-based programs such as Medicaid and Medi-Cal.*
For HECM guidelines please view our equity mortgage page.
*This advertisement does not constitute financial advice. Please consult a financial advisor regarding your specific situation. There are some circumstances that will cause the loan to mature and the balance to become due and payable. Borrowers are still responsible for paying property taxes, homeowner’s insurance and maintaining the property to HUD standards. Failure to do so could make the loan due and payable. Credit is subject to age, income standards, credit history, and property qualifications. Program rates, fees, terms, and conditions are not available in all states and subject to change. Borrowers should seek professional tax advice regarding reverse mortgage proceeds.
Contact me today for your complementary evaluation and quote.