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The HECM Reverse Mortgage Program Explained


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TERMINOLOGY

The HECM reverse mortgage program is very popular among people of retirement age. Many use this to create a regular source of income during their retirement years. Here are the basics of the HECM reverse mortgage program.

HECM Reverse Mortgage Program

The HECM reverse mortgage program is administered by the Federal Housing Administration (FHA). The term "HECM" stands for "Home-Equity Conversion Mortgage." You can get access to this mortgage program through any lender who works with the FHA.

Purpose

The basic idea behind this mortgage program is quite simple. By taking out this type of mortgage, you will be able to access some of the money from the equity in your house. Rather than making payments to the bank to pay off your mortgage, you are going to receive payments from the bank, which will be purchasing part of your equity. You can also set up a line of credit for you to access if you would prefer not to receive a monthly payment.

Qualifications

With this type of loan, you do not have to meet any type of credit or income qualifications. You are not going to be making any monthly payments to the lender, so they do not care if you can afford to make payments. This means that they will not be looking at your credit report during the process.

In order to qualify for this type of mortgage, you will have to be at least 62 years old. This applies to you and your spouse if you are married. You also have to have a house that is paid off or have a very low mortgage balance that can be paid off quickly.

Another requirement is that you attend an informational consultation with a certified counselor with the HECM program. He or she will explain how the program works and what you should expect from it.

Paying off the Loan

Many people wonder what will happen if they outlive the loan payments. The bank is going to keep making payments to you until they have reached the predetermined amount of equity that you will be borrowing. Once they reach this point, the payments will no longer be coming to you. However, you do not have to move out of the house or start paying them back at this point. You can simply continue to live in the house until you die if you wish. As long as you or your spouse is living in the house, no repayment will be necessary. If you sell the house, you will then have to pay back the lender with proceeds from the sale. If you or your spouse passes away, you can also repay the mortgage with funds from a life insurance policy. Regardless of what happens, the lender will not be able to require you to make payments or kick you out of the house at any point. This provides you with a lot of flexibility and assurance in your retirement.