Reverse Mortgage

What is a HECM (Reverse Mortgage) Loan?

• HECM stands for Home Equity Conversion Mortgage.

•  A HECM is the FHA-insured reverse mortgage that allows qualified homeowners 62 and older to monetize and access part of the equity in their home.

• Home equity can be accessed in a number of ways and enables greater cash flow to the borrower. Imagine living in your home without a traditional monthly mortgage payment, or instead, enjoying monthly loan proceeds from the years you’ve invested in your home.

• After you get a reverse mortgage on your primary residence, repayment is not due until the home is sold, the last borrower passes away, permanently leaves the home, or does not comply with the loan terms. Borrowers also must keep the home in good condition, pay property taxes, and keep homeowner’s insurance coverage to avoid the loan becoming due and payable.

Who qualifies for a HECM Reverse Mortgage?

Both borrowers be signatory to the Reverse Mortgage Loan and both must be a minimum of 62 years old at the time of closing (unless borrowers live in Oklahoma or Tennessee - where only one borrower is required as a signator to the Reverse Mortgage loan).

• The Borrowers must maintain the home as their primary residence and live in it a minimum of 6 months out of every year.

• Borrowers must meet a financial assessment to determine their financial capacity and willingness to adhere to the loan obligations, such as maintaining insurance and paying property taxes.

• For a Reverse Mortgage Refinance, there needs to generally be enough equity available to be monetized through the Reverse Mortgage so as to make the loan financially beneficial.

How do Borrowers access proceeds of a Reverse Mortgage?

• The most important feature of a HECM (Home Equity Conversion Mortgage) is the ability for the homeowner (borrower) to incorporate housing wealth into their retirement strategy.

• This is done by allowing the borrower to monetize a portion of their housing equity into an accessible form of usable currency or cash. Homeowners utilizing a HECM or Reverse Mortgage can access their monetized housing equity in the form of:

  1. Cash available at closing*

  2. Line of Credit accessible following closing.**

  3. A Term Payment - a specific-amount monthly payment to the homeowner (borrower) over a predetermined and fixed amount of time.***

  4. A Tenure Payment - A specific-amount monthly payment to the homeowner (borrower) over the remainder of their lives (in accordance with the loan specifications) for as long as one of the borrowers lives in the home as a principal residence.****

*Borrowers may access up to 60% of the available Principal Limit of a Reverse Mortgage at closing. The remaining 40% of the available Principal Limit of their Reverse Mortgage may be accessed after one year.

**Borrowers may establish a Line of Credit in the amount of the available Principal Limit. This Line of Credit may be accessed at any time by the borrower (once the Servicing Agent for the Reverse Mortgage has been established). The Line of Credit of a Reverse Mortgage includes a growth feature, whereby the Principal Limit and available proceeds of the Reverse Mortgage will grow at a rate of 1/2% greater than the interest rate of the Reverse Mortgage.

***In a Term payment plan, homeowners (borrowers) will receive equal payments for a set period of time that they choose, based on the amount of available principal limit.

****In a Tenure payment plan, homeowners (borrowers) will receive equal monthly payments as long as at least one borrower lives in the home as a principal residence. Monthly payments are calculated under the assumption that at least one of the borrowers will live to be age 100.