What’s a HECM reverse mortgage loan?

Home Equity Conversion Mortgages (HECM) are also known as reverse mortgage loans. These loans help American homeowners age 62 and older convert a portion of their home equity into taxfree cash. HECM Loans are insured by the Federal Housing Administration and allow seniors more financial security.

How does a Reverse Mortgage work?

A reverse mortgage allows eligible homeowners to use cash from their equity. With a reverse mortgage, you will continue to live in your home and retain ownership without monthly mortgage payments.** The loan balance will be repaid when the last borrower or non-borrowing spouse has left the home or does not otherwise comply with the terms of the loan.

The amount you receive is based on the age of the youngest borrower or eligible non-borrowing spouse, appraised value of the home, and current interest rates.

**Borrower must continue to pay property taxes, homeowners insurance, and home maintenance costs.

Common uses of a reverse mortgage?

The proceeds from a reverse mortgage can be used for almost anything.

• Eliminate monthly mortgage payments
• Make retirement savings last longer
• Use a “standby” HECM reverse mortgage growing line of credit to preserve investment accounts during market downturns or build a safety net for unplanned emergencies, home repairs, and healthcare expenses
• Supplement your retirement income with monthly payments
• Use a HECM for Purchase (H4P) to buy a home that better fits your needs
• Support aging in place expenses, like caregiving and home modifications

HECM has built in safeguards to better protect borrowers

The United States Department of Housing and Urban Development (HUD) has put safeguards in place to protect borrowers and improve HECM reverse mortgage loans.

1. Financial Assessment Recent changes to HECM loans require a thorough evaluation of the borrower’s ability to meet financial obligations of the loan, such as the ability to pay for homeowner’s insurance, property taxes, and home maintenance.

2. Non-borrowing Spouse Loan amounts are available to borrowers with a non-borrowing spouse under the age of 62. When a borrower passes away, rules allow for an eligible spouse to remain in the home without foreclosure as long as they comply with the terms of the loan.

3. Counseling Before loan approval, potential borrowers must complete a counseling session with an FHA approved counselor. The counselor will ensure borrowers understand their options and are able to decide if a HECM loan is right for them.

This material is not provided by, nor was it approved by the Department of Housing & Urban Development (HUD) or by the Federal Housing Administration (FHA). It is not intended to be a substitute for legal, tax or financial advice. Consult with a qualified attorney, accountant or financial advisor for additional legal or tax advice.

*There are some circumstances that will cause the loan to mature and the balance to become due and payable. The borrower(s) must continue to pay for property taxes and insurance and maintain the property to meet HUD standards or risk default. Credit is subject to age, minimum income guidelines, credit history, and property qualifications. Program rates, fees, terms and conditions are not available in all states and subject to change.