About HECM Loans

About HECM Loans

An HECM, or Home Equity Conversion Mortgage, is the most common form of reverse mortgage, accounting for roughly 95% of the market according to the National Coalition of Aging. Of all the reverse mortgage options available, only HECM Loans are insured by the Federal Housing Administration (FHA). 

An HECM is a mortgage loan used to take money out against the equity of your home in order to supplement your monthly income. For people in the right situation, it is also possible to purchase a home with an home mortgage HECM, so long as they can find a property with suitable equity for the loan.

Advantages to Having a Reverse Mortgage

  • It’s impossible to owe more than your home is worth
  • You will still own your home
  • Your funds are available through several different payment options

Is a reverse mortgage right for you? Fill out our quick 1-minute form to have a Mortgage Advisor contact you.

HECM Reverse Mortgage Standard Loan

Through an HECM loan, a borrower can receive their payments in a lump sum through monthly installments or as a line of credit, which they can draw from at need. You can also choose to receive your payments in any combination of the three. For those looking for a fixed interest rate on their loan, the only option available is the lump sum payment. Interest for a lump sum payment will accrue beginning with the withdrawal. The two other forms of payments are subject to market fluctuations.

This is the best option for borrowers who need a higher loan amount.

Benefits of an HECM Loan

HECM loans are offered through the U.S. Department of Housing and Urban Development (HUD), and therefore, are federally insured through the Federal Housing Administration (FHA). HECM loans are the only reverse mortgages that are federally insured.

Because the loan is backed by the federal government, you and your heirs will never owe more than what the home is worth, even if the property’s value declines. Also, should the lender go out of business, you will continue to get any monthly payments and your line of credit will remain. 

Qualifying for an HECM is easy. The loan has flexible credit requirements and you are not required to repay the loan as long as it remains your primary residence, you maintain the property, and stay current on all taxes and insurances required.

Reverse Mortgage Myths and Facts 

Myth: Low income can disqualify you for a reverse mortgage.

Fact: These loans were specifically made to help those with limited income.

Myth: Having a current conventional mortgage can stop you from getting a reverse mortgage.

Fact: A reverse mortgage can be used to pay off your current mortgage and will use the equity to help you receive monthly payments or set up a line of credit. 

Myth: My heirs will be responsible for repaying my reverse mortgage.

Fact: Because a reverse mortgage is a non-recourse loan, they will never have to worry about paying it back. Heirs will never be required to pay more than what the home is worth at the time of repayment, even if the value of the loan exceeds the property’s current value. 

Heirs can choose to sell the home to pay off the reverse mortgage or pay it off in full, often through a conventional mortgage in order to keep the home. 

Myth: If I live past my life expectancy, I’ll lose my home.

Fact: As long as you meet the required expectations on the loan, it doesn’t matter how long you live in the home. This includes paying the taxes and insurance and properly maintaining the property.

Myth: Getting a reverse mortgage will affect my eligibility for Social Security and Medicare.

Fact: HECM loans do not affect your eligibility for government benefits except for Medicaid, which has specific asset restrictions. If you receive Medicaid, it’s recommended you only take out your necessary expenses each month, otherwise they will count against you. 

Myth: You’ll owe taxes on your reverse mortgage.

Fact: The IRS does not currently count reverse mortgage payments towards your income and therefore, you will not be taxed on it.

Myth: A reverse mortgage and home equity line of credit are the same thing.

Fact: Reverse mortgages do not require a monthly payment, while a home equity line of credit does.

Myth: Reverse mortgages have a lot of out-of-pocket expenses.

Fact: While a reverse mortgage has closing costs, like any loan, most of the costs associated with the loan can be included in the body of the loan.

Is a reverse mortgage right for you? Fill out our quick 1-minute form to have a Mortgage Advisor contact you.