What is a Reverse Mortgage?

Picture this: a financial tool tailored for homeowners, turning equity in your cherished home into a dependable cash source. This is the Reverse Mortgage, a unique twist on the traditional mortgage. Instead of you paying a mortgage, this innovative product pays you, offering a fresh approach to managing your finances. You'll receive regular payments, establish lines of credit, or even obtain a substantial lump sum, all from the comfort of your own home. The most popular version of this is the 'Home Equity Conversion Mortgage' or HECM. Your home, a symbol of your hard work and family memories, now also serves as a tool for financial stability. Use a Reverse Mortgage for home maintenance, improvements or even toward the dream of a new home. Embrace the concept of a Reverse Mortgage, and welcome to a future filled with possibilities.

 
Continue reading to learn more about your options, or contact a reverse mortgage and HECM pro today to get started!

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What are the facts on Reverse Mortgages &
Home Equity Conversion Mortgages?

Check Mark Run your numbers to see how much you qualify for in as few as 5 mins and fund the retirement you’ve worked hard to achieve.

Check Mark Borrowers have responsibilities such as property upkeep, property tax, and homeowner's insurance.

Check Mark While all HECMs are reverse mortgages, the opposite is not true - not all reverse mortgages are HECMs. The specific differences between these two terms will be further elaborated.

Check Mark Misconceptions and misunderstandings exist around these loans, but recent updates to rules and regulations provide enhanced protection for borrowers.

What are the Benefits of a HECM or Reverse Mortgage?

What’s the Difference Between a HECM & Reverse Mortgage?

The term "HECM" refers to a specific type of reverse mortgage that is insured by the FHA, while "reverse mortgage" is a broader category that includes various types of loans that allow homeowners to convert home equity into useable funds for any purpose without monthly payments.

HECMs are regulated and insured by the FHA, while other reverse mortgages may be offered by private lenders and not backed by the FHA.

What are the different HECM options?

HECM Type Who is it for? What does it do? What are the benefits?
Traditional HECM Current homeowners or those
with an existing conventional
mortgage and/or home equity
loan
Those 62 and older can utilize
a reverse mortgage for a new
home purchase without the
requirement for monthly
payments
Available for homeowners
with an existing HECM
HECM for purchase Allows borrowers to refinance
their current mortgage into a new
HECM loan
Helps retirees to move to a
better-suited home by
leveraging the sale of their
current property and
combining it with a reverse
mortgage loan
Allows HECM borrowers to
refinance their current
reverse mortgage into a
new HECM loan
HECM to HECM Refi Eliminates the monthly principal
and interest payment

Increase monthly cash flow
Monthly mortgage payments
are not required

The loan is repaid when the
home is sold, the homeowner
moves out, or passes away
Potentially lower costs and
increase available funds.
Jumbo / Portfolio
Reverse Mortgage
For homeowners with high-
value properties that
exceed the FHA loan limits
of traditional HECMs
Allows some homeowners
to access a larger portion of
their home equity
Helps homeowners access
larger sums of money

The 5 Steps to a Reverse Mortgage or HECM

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Education

A licensed loan officer will assess your individual needs and share the benefits of a HECM or reverse mortgage with you.

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Counseling

HECM or reverse mortgage applicants are required to undergo independent counseling to ensure that they fully understand their financial decision.

Number 3 icon

Application

An expert loan officer will be by your side to let you know exactly which supporting financial documents you’ll need to provide.

Number 4 icon

Appraisal

A home appraisal will be scheduled to determine your property’s value and ensure your home is in a livable condition.

Number 5 icon

Closing

It’s time to sign the final documents.

Home Equity Conversion Mortgage FAQs

Still curious about a Reverse Mortgage or HECM? Read on

**This is not a commitment to lend. The borrower must meet all loan obligations, including living in the property as the principal residence and paying property charges, including property taxes, fees, and hazard insurance. The borrower must maintain the home. If the borrower does not meet these loan obligations, then the loan will need to be repaid. Otherwise, the loan must be repaid when the last borrower passes away or sells the home. Prices, guidelines and minimum requirements are subject to change without notice. Some products may not be available in all states. Subject to review of credit and/or collateral; not all applicants will qualify for financing. It is important to make an informed decision when selecting and using a loan product; make sure to compare loan types when making a financing decision. This material has not been reviewed, approved or issued by HUD, FHA or any government agency. Rate, Inc. is not affiliated with or acting on behalf of or at the direction of HUD, FHA or any other government agency. To find a HECM Mortgage counselor near you, search the HECM Counselor Roster at https://entp.hud.gov/idapp/html/hecm_agency_look.cfm or call (800) 569-4287.

***If part of your loan is held in a line of credit upon which you may draw, then the unused portion of the line of credit will grow in size each month. The growth rate is equal to the sum of the interest rate plus the annual mortgage insurance premium rate being charged on your loan.

When the loan is due and payable, some or all of the equity in the property that is the subject of the HECM mortgage no longer belongs to borrowers, who may need to sell the home or otherwise repay the loan with interest from other proceeds. The lender may charge an origination fee, mortgage insurance premium, closing costs and servicing fees (added to the balance of the loan). The balance of the loan grows over time and the lender charges interest on the balance. Borrowers are responsible for paying property taxes, homeowner’s insurance, maintenance, and related taxes (which may be substantial). We do not establish an escrow account for disbursements of these payments. A set-aside account can be set up to pay taxes and insurance and may be required in some cases. Borrowers must occupy home as their primary residence and pay for ongoing maintenance; otherwise the loan becomes due and payable. The loan also becomes due and payable (and the property may be subject to a tax lien, other encumbrance, or foreclosure) when the last borrower, or eligible non-borrowing surviving spouse, dies, sells the home, permanently moves out, defaults on taxes, insurance payments, or maintenance, or does not otherwise comply with the loan terms. Interest is not tax-deductible until the loan is partially or fully repaid.

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