Is a Home Equity Conversion Mortgage Right For You?
What is a HECM Reverse Mortgage Loan?
A Home Equity Conversion Mortgage (HECM) is a unique loan option specifically designed for homeowners aged 62 and older. It allows you to convert a portion of your home equity into cash while continuing to live in and own your home. HECMs are the most popular type of reverse mortgage and the only ones insured by the Federal Housing Administration (FHA). To get a HECM, you’ll need to work with an FHA-approved lender like Fairway Reverse.
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Key Benefits of a HECM Reverse Mortgage
Boost Your Cash Flow
Tap into your home’s equity to access cash without incurring income tax.* Use the funds however you like—whether it’s for daily living expenses, home improvements, or unexpected medical bills. Even better, most reverse mortgages don’t affect Social Security or Basic Medicare benefits.
*Disclaimer: This advertisement does not constitute tax advice. Please consult a tax advisor regarding your specific situation.
Flexible Repayment Options
With a HECM, you’re in control of how you repay the loan:
- Pay as much or as little as you like each month.
- Or make no monthly mortgage payments at all!
You’ll still need to maintain your home and keep up with property taxes and homeowners insurance, just as you would with a traditional mortgage.
The FHA guarantees that no repayment is required until the last borrower moves out or passes away. After moving out, you or your estate will have up to 12 months to repay the loan—typically by selling the home.
Non-Recourse Protection
Worried about market fluctuations? The FHA ensures that if your loan balance ever exceeds your home’s value when it’s sold, neither you nor your heirs will be responsible for the difference. If your home sells for more than the loan balance, any remaining equity goes directly to you or your heirs.
You Retain Ownership
- You remain on the title as the homeowner.
- You can sell your home at any time.
Line of Credit That Grows Over Time
A HECM line of credit comes with a unique growth feature—the unused portion of your credit line grows at the same rate as your loan balance. This means you’ll have access to even more funds over time, no matter what happens to your home’s value.
Start exploring how a HECM reverse mortgage can help you unlock financial freedom in retirement. Contact us today!
With a Home Equity Conversion Mortgage (HECM), also known as a reverse mortgage, you borrow against your home equity, and the lender provides an advance based on a percentage of that equity. Here’s how it works:
- No monthly principal or interest mortgage payments are required, but property charges (e.g., taxes and insurance) must be paid.
- The loan becomes due when the last borrower permanently moves out or passes away.
- At loan maturity, selling the home always satisfies the loan balance.
HECM interest rates depend on:
- The lender and the type of rate (fixed or variable).
- Variable rates include an index (e.g., the Constant Maturity Treasury) and a lender margin.
- Contact Fairway retirement mortgage specialists to find the current rates.
To qualify, you must meet the following criteria:
- Be at least 62 years old.
- Own an eligible property and reside in it as your primary residence.
- Have significant equity in the home.
- Meet minimum income and credit requirements.
- Complete financial counseling.
Pros:
- Access a portion of your home equity as cash, monthly advances, or a growing line of credit.
- No required monthly mortgage payments as long as loan terms are met.
- Maintain flexibility by paying property taxes, insurance, and upkeep expenses.
Cons:
- The loan balance grows over time as interest and fees accrue.
- Reduces home equity, potentially leaving less for heirs.
Absolutely.
- You can make prepayments at any time.
- Certain tax advantages* may apply.
Please consult a tax advisor for guidance specific to your situation.
No, a HECM is not a second mortgage. Key facts:
- It must be in the first lien position.
- Loan proceeds can pay off existing mortgages if they meet seasoning guidelines (e.g., liens over 12 months old).
The loan repayment process includes:
- A maturity event triggers repayment, such as the home no longer being the primary residence.
- The home is usually sold to repay the loan.
- HECMs are non-recourse loans, so the sale price of the home covers the loan balance, with no additional liability to the borrower or heirs.
Yes! With a Home Equity Conversion for Purchase (H4P) loan, you can:
- Buy a new primary residence by putting down as little as 45%-65% of the purchase price from your own funds.
- Have the remaining balance funded by the H4P loan.
The required down payment depends on factors such as your age (or your non-borrowing spouse’s age, if applicable), current interest rates, and the lesser of the home’s appraised value or purchase price.
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Kim Prater - Licensed Reverse Mortgage Professional
"Reverse mortgages can be complicated. If you want straight forward advice from a reverse mortgage specialist who really cares about his clients, then fill out this form or give me call."
Kerry Kim Prater
