FHA Reverse Mortgage – HECM
An FHA Reverse Mortgage, also known as a HECM (Home Equity Conversion Mortgage) is loan that allows seniors over the age of 62 to tap into the equity in their home. This type of FHA Reverse Mortgage enables the homeowner to receive money in the form of fixed monthly payments for life or fixed terms, through a line of credit or in one full lump sum payment.
A FHA Reverse Mortgage (HECM) can also be used to purchase a primary residence when the borrower is 62 years of age or older and is able to use cash in hand to pay the difference between the reverse mortgage and the sales price plus closing costs for the property. This type of reverse has started to gain popularity in the last few years but by large most reverses are done as refinances on their current homes.
FHA Reverse Mortgage (HECM) Requirements
A FHA Reverse Mortgage (HECM) has the following requirements that need to be met in order to be eligible:
- Current homeowners must be at least 62 years of age or older
- They may own their home outright or have a mortgage balance that can be paid off at closing with proceeds from the reverse mortgage.
- The home must be their principal residence.
With a reverse mortgage, the money is loaned to you and becomes a lien on your house. You will not be required to make any monthly mortgage payments while enjoying the security of receiving supplementary income to help pay for:
- Home improvements
- Pay off your current mortgage
- Supplement your retirement income
- Pay for health care expenses
- Or any other financial need you may have.
The loan is only payable if you move, sell your home or last surviving borrower passes away.
You have a choice of how you would like to receive the funds disbursed. Options include:
- a lump sum of money
- fixed monthly payments for a specific period of time as long as you live in the home
- a credit line which allows you to draw on the loan proceed at any time in amounts you choose or a combination of all three.
There are no income or credit qualifications for a reverse mortgage.
FHA does require that you receive counseling before you move forward with a reverse mortgage. Counseling is done through HUD approved counseling agency. You can find a list of approved counseling agencies by clicking here.
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