HECM (Reverse Mortgage)
Imagine living in your home mortgage free, or enjoying monthly proceeds for life benefiting from the years you’ve invested in your home. A Home Equity Conversion Mortgage (HECM), also known as a Reverse Mortgage, is a unique tool designed for seniors 62 and older. You enjoy access to part of the equity in your home and the freedom and comfort of the home you’ve known for so many years. It’s your home, now you can put it to work for you.
Reverse mortgage borrowers retain ownership and title to their home. It’s yours just as it was before, but now you can benefit from the equity that’s been building in your home for years. In addition, HECM reverse mortgage loans give you the peace of mind of an FHA backed loan where you will never owe more than the home is worth. You can get a reverse mortgage on your primary residence and no repayment is due until the last borrower passes away or permanently leaves the home.
As a protection all those seeking a reverse mortgage are required to obtain HUD counseling (from an independent third party) prior to incurring any costs associated with the loan. While proceeds from a reverse mortgage are not subject to personal income taxation, borrowers should seek tax advice on how proceeds may affect government needs-based programs such as Medicaid and Medi-Cal.
Peter Rueth, our Reverse Mortgage Specialist, was recently featured by FPA Colorado.
June 2017 – The article is titled “A Better Way To Buy A Home in Retirement” and “For most of those over 62, housing costs is the single biggest expense throughout retirement. It’s an expense that requires careful planning and if left unchecked, it can derail your client’s financial security. Most people are not aware that someone over 62 can purchase a home with the FHA approved Reverse Mortgage product commonly referred to as the “H4P”. Click here to learn how a H4P can be used by your clients to double their purchasing power when looking to buy a home for retirement.
September 2017 – In the article, “HUD Changes to HECM Loan” Peter outlines the unexpected, major, time-sensitive changes to the reverse mortgage program in order to help reduce program risks to the government and taxpayers. Click here to learn how these changes might affect the mortgage insurance premiums you’d incur at the time of origination.
* Borrowers should seek professional tax advice regarding reverse mortgage proceeds.
To become eligible for a reverse mortgage, you must be at least 62 years old and own your home. You must have equity in the house to pay off any outstanding balances, and your home must be occupied as your principal residence.
The amount of money that a lender will loan depends upon how old you are at the time of closing, how much your house is worth, the total amount of liens, and interest rates. The type of reverse mortgage product and the payment options can also affect the amount of money you will receive.
There are several different options to choose from. You can take the money in a lump sum, set up a line of credit, monthly payment, or a combination of all three.
The costs of a “forward” loan are very similar to a reverse loan. For example, an origination fee is paid to the broker/lender, a MIP (mortgage insurance premium) is paid to HUD on the Home Equity Conversion Mortgage (HECM), an appraisal fee, a flood certification fee, a doc prep fee, title and settlement fees, and other standard closing costs.
Yes. Counseling is required to protect borrowers from receiving incorrect information about reverse mortgages. The lender must be in receipt of the counseling certificate before they can close the loan. To locate a reverse mortgage counselor near you, contact your loan officer or your local HUD office.
The equity in your home is considered your money and not additional income. All the funds from a reverse mortgage are tax free. (Borrowers should seek professional tax advice regarding reverse mortgage proceeds.)
A reverse mortgage was created so borrowers don’t have to pay fees during the course of the loan. However, there is a monthly servicing fee that is associated with reverse mortgages. For more information on the service set-aside, please talk to your loan officer.
Learn the Facts
Below, are a number of resources to help you learn more about HECM home equity conversion mortgages.
Once you’ve seen what HECM might be able to do for you, please use the form below to schedule a meeting with our HECM Specialist, Peter Rueth.