How the HECM Works
American homeowners age 62 and older are able to convert a portion of their home equity into a liquid cash asset through the use of a Reverse Mortgage. As a senior friendly product, these loans require no income, asset verification. Eligibility is based on age, home value, location and existing (if any) mortgage balance. The HUD/FHA reverse mortgage product is called the HECM (Home Equity Conversion Mortgage).
The greatest benefit of the HECM is that this loan allows seniors to stay in their homes and utilize their home equity for medical needs, insurance products, home repair, supplemental income, estate planning, debt payoff, travel or, in general, to improve their quality of life. There are no restrictions on how the proceeds are spent and it is on a tax-free basis, since these proceeds are a form of property equity.
As a borrower of a Reverse Mortgage you retain ownership of your home for life. This is guaranteed as long as you maintain your home, pay your homeowner’s insurance and property taxes.
In order to qualify for a HECM, your home must be your primary residence. It can be a single family, condominium, townhouse, PUD or 2-4 units (as long you occupy one of the units as your primary residence). As a general rule, the older you are the larger the benefit will be. You may qualify even though you still owe money on your first or second mortgage.
As a HECM borrower you retain ownership of your home for life. This is guaranteed as long as you maintain your home, pay your homeowner’s insurance and property taxes.
- The proceeds from the loan are tax-free
- There are no minimum requirements
- You can use the money for any purpose
- Repayment will never be due until after you permanently move out of the home
- You always maintain ownership of your home
- You can use your HECM to purchase a new or resale home