HECM
What is a HECM?
A HECM is a reverse mortgage program insured by the Federal Housing Administration (FHA). It’s designed to help seniors access the wealth tied up in their homes without having to sell or move out. Whether you’re looking to supplement your retirement income, pay off medical bills, or enjoy a more comfortable lifestyle, a HECM can be a great option.
With a HECM, the amount you can borrow is based on several factors, including your age, the appraised value of your home, and current interest rates. You must continue to live in the home as your primary residence, maintain the property, and stay current on taxes and insurance.
How a HECM Will Affect You
You Kill Your Mortgage; Now You Get Paid!
When you take out an HECM, you essentially eliminate your existing mortgage (if you have one) by using part of your new HECM to pay it off. This means you no longer have to make monthly mortgage payments, freeing up more money for other needs. Instead of paying the lender, you’ll receive payments from them. This can be especially beneficial for those on a fixed income looking for ways to cover monthly expenses.
You Still Own Your House
A common misconception about reverse mortgages is that the lender owns your home. With a HECM, you remain the owner of your property, just as you would with a traditional mortgage. You can live in your home for as long as you want, provided you comply with the loan terms, such as maintaining the property and paying taxes and insurance.
You Still Pay Property Taxes and Homeowner’s Insurance
Although you no longer make monthly mortgage payments, responsibilities still come with having a HECM. You must continue to pay your property taxes and homeowner’s insurance and maintain your home. If you fail to meet these obligations, your loan could become due, and you could risk foreclosure.
What Does Reverse Mortgage Mean?
In simple terms, a reverse mortgage is a loan that allows homeowners to convert part of their home equity into cash without selling their house. Unlike a traditional mortgage, where you borrow money and make monthly payments to the lender, a reverse mortgage works the other way: the lender pays you.
The amount you receive through an HECM can be distributed in various ways, including monthly payments, a line of credit, or a lump sum. The loan balance increases over time as interest is added, but you only need to make monthly mortgage payments if you continue to live in the home. The loan only becomes due when you sell the property, move out, or pass away.