What is a HECM Reverse Mortgage?

There are various types of reverse mortgages available on the market today.   The most popular is the HECM Reverse Mortgage.  The vast majority of reverse mortgages in existence are HECM loans.   However there are other types of reverse mortgages  such as Proprietary Reverse Mortgages (aka Jumbo Reverse Mortgages) which offer higher loan amounts than a HECM.

 

 What Does HECM Stand For?

 

HECM stands for Home Equity Conversion Mortgage.  This type of reverse mortgage is insured by FHA (Federal Housing Administration).  The loan program was created in the 1980's out of an act of congress.  The HECM was designed with the intention of allowing older homeowner's to convert part of the equity in their home to cash.  

 

HECM Basics

  

  • Designed for borrower(s) at least 62 or older
  • Converts a portion of the home equity equity into cash to be used for any purpose
  • Eliminates the monthly mortgage payment on current mortgage *
  • Offers some protections and safeguards as the loan program is regulated and insured by FHA
  • Loan becomes due when the borrower permanently moves out of the home or passes away - typically paid off thru sale of home or other method by the estate *

    

* For the loan to remain in good standing, at least one borrower must continue to occupy the home as their primary resident plus continue to pay ongoing property taxes, homeowners insurance premiums, hoa dues (if any) plus maintain the home - otherwise the loan becomes due and payable.  As long as the borrower(s) does those items - No Monthly Mortgage Payments Are Required.

  

Explore the Potential Benefits of a HECM Reverse Mortgage in San Diego and California

 

 While there are many reasons older homeowners consider securing a HECM Reverse Mortgage for themselves, here are a few of the top ones.

  

  • Supplement Retirement Income: Boost your retirement funds by tapping into your home equity with HECM.
  • Eliminate the Monthly Mortgage Payment on Current Traditional Mortgage: Say goodbye to monthly mortgage payments by using HECM funds to eliminate the monthly mortgage payment on your existing mortgage.  This type of refinance will transfer your current mortgage balance into a reverse mortgage which has no required monthly mortgage payments.  Homeowner still must pay for their property taxes, homeowners insurance premiums and maintenance expenses to stay in good standing.
  • Cover Medical Expenses: Use the HECM proceeds to cover medical bills and alleviate financial stress related to healthcare expenses including paying for in-home care, dental work and more.
  • Fund Home Improvements: A very popular use of the HECM loan proceeds is to make upgrades to the home they love and want to stay living in.  
  • Flexible Options To Receive Money: A HECM offers multiple choices on how to receive the money from the loan.  Choices include receiving funds as a lump sum at closing, receiving ongoing monthly payments, setting up line of credit for future draws or a combination of all three.