What Is a Reverse Mortgage Loan?
The most popular type of reverse mortgage loan is the Home Equity Conversion Mortgage (HECM), and it can be a game-changer for homeowners 62 and over. Learn more with Leslie and the Kight Team.
The Basics of Reverse Mortgage Loans
While there are several different types, most reverse mortgage loans today are HECMs, the only reverse mortgages insured by the Federal Housing Administration (FHA). Unless noted otherwise, if we refer to “reverse mortgage loans,” we’re talking about HECMs.
HECMs are home-secured loans specifically designed for homeowners 62 and older, enabling them to convert a portion of their home equity into cash and defer repayment until a later date.
Hear How a Reverse Mortgage Provided
Life Changing Cash Flow for Rebecca
The Basics of Reverse Mortgage Loans
While there are several different types, most reverse mortgage loans today are HECMs, the only reverse mortgages insured by the Federal Housing Administration (FHA). Unless noted otherwise, if we refer to “reverse mortgage loans,” we’re talking about HECMs.
HECMs are home-secured loans specifically designed for homeowners 62 and older, enabling them to convert a portion of their home equity into cash and defer repayment until a later date.
Hear How a Reverse Mortgage Provided Life-Changing Cash Flow for Rebecca
HECM Eligibility and Payout Options
Basic Qualifications
- Age: The borrower must be age 62 or older
- Home ownership: The borrower must be the owner of the home and the home must have significant equity (e.g., the borrower owns the home free and clear, or the mortgage balance has been substantially paid down)
- Residency: The home must be the borrower’s primary residence. (They must live in the home for more than six months out of every year)
- Credit requirements: The borrower must meet minimal credit requirements.* (There is no minimum credit score requirement, and the income requirements tend to be less stringent than a traditional mortgage.)
- Property types: Single family residences | 2- to 4-unit properties (as long as the borrower occupies one unit | Condos in HUD-approved condominium project | Condos that qualify for single-unit approval (SUA) | Modular homes | Manufactured homes that meet FHA requirements
Payout Options for Borrowers
- Single disbursement, lump-sum: The borrower receives a single large payment from the lender at closing. This payment option is only available as a fixed interest rate HECM. (Note: All other payment options are only available as a variable interest rate HECM)
- Line of credit: The most popular option, it allows the borrower to draw available funds as needed. As long as the borrower meets their loan obligations, the available money in the HECM line of credit is guaranteed, and the unused portion grows over time at the same compounding rate as the loan balance, giving the borrower access to more available funds over time (the potential growth of the unused funds is not capped)
- Tenure payment: The borrower receives fixed monthly payments for so long as they occupy the home and abide by the loan’s terms
- Term payment: The borrower receives fixed monthly payments for a set number of months
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Learn the Pros and Cons
of HECMs
No solution is perfect, but for many, the HECM pros far outweigh the cons.
Is a Reverse Mortgage Loan Right for You?
Reverse mortgage loans can be a game-changer for many retirees, but it’s important to learn how one could fit with your unique situation and goals.
Leslie has decades of experience with a variety of loans and is a Reverse Mortgage Specialist. Feel free to reach out with any questions you may have!
Invest in the Future You Deserve.
Not only do you deserve a home you love, but one that will lead to a better future. We can help you get there.
*Although applicants don’t have to go through a traditional loan application process based on their credit scores and histories, they do have to undergo a financial “assessment” to verify their assets and liabilities and determine if the borrowers’ current financial situation is sustainable for the foreseeable future. The home in question must also be in reasonably good shape, and any urgent major repairs must be completed before the homeowner can receive the net reverse mortgage proceeds.