Home Equity Conversion Mortgage
What is a Home Equity Conversion Mortgage (HECM)?
A HECM loan is a government insured reverse mortgage. Reverse Mortgages allow a senior to access a portion of their home's equity and use the proceeds however they choose. The senior retains the home’s title and no monthly mortgage payments are required as long as they continue to live in the home and meet the terms of the financing agreement.
What types of real estate properties are eligible?
Single-family residences, 2 to 4 unit homes, modular, planned unit developments, and many condominiums are eligible. Manufactured homes may also be eligible.
Can a reverse mortgage be used to purchase a home?
Yes! You can use the proceeds to purchase a new primary residence. The senior must be able to make a down payment from an acceptable source of funds. The down payment is determined by the home value minus the amount of proceeds received from the reverse mortgage. The reverse mortgage does not require monthly mortgage payments and there is limited credit qualification.
Are the proceeds from the reverse mortgage taxable?
Home loan advances from a reverse mortgage are generally not considered taxable income by the IRS. (Please consult a tax professional)
When does the reverse mortgage come due?
The reverse mortgage loan remains active as long as at least one senior lives in the home as a primary residence and meets the terms of the financing agreement. The senior must maintain the property in good repair and pay ongoing property insurance, tax assessments, and HOA dues.
Are There penalties for paying the loan off?
There are never prepayment penalties associated with HECM loans
Reverse Mortgage Misconceptions
Reverse mortgages are only for seniors who are poor
The senior sells the house or otherwise gives up title to the lender
Reverse mortgages are expensive
The senior is losing home equity over time
The senior or the family will be left with a large mortgage debt at the end
The senior can never sell the home