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A Home Equity Conversion Mortgage (HECM) and Reverse Mortgages allow you to access part of your home’s equity without ever having to make a mortgage payment.
Frequently Asked Questions
How is Money From a HECM or Reverse Mortgage Distributed?
There are several ways to receive the proceeds from a HECM or reverse mortgage:
– Lump sum – a lump sum of cash at closing
– Tenure – equal monthly payments as long as the homeowner lives in the home
– Term – equal monthly payments for a fixed number of years
– Line of Credit – draw any amount at any time until the line of credit is exhausted
– Any combination of the options listed above
What are the Loan Limits?
Use our free calculator to estimate the available amount. This generally depends on four factors:
- Current interest rate
- Appraised value of the home
- Government imposed lending limits.
Does the Homeowner Keep Title to the Property?
Borrowers maintain title and may remain in the home indefinitely, even if the loan balance becomes greater than the value of the home.
The general loan conditions are: At least one homeowner lives in the home as their primary residence, continues to pay required property taxes and homeowners insurance, and maintains the home in accordance with FHA requirements.
Do Heirs Inherit an Estate with a HECM Loan?
HECM loans are structured to preserve equity in the property. In the event of death or in the event that the home ceases to be the primary residence for more than 12 months, the homeowner’s estate has 6 months to either refiance the property/repay the HECM loan, or sell the property.
What happens when the home is sold? If the equity in the home is higher than the balance of the HECM mortgage, the remaining equity belongs to the estate. If the home sells for less than the amount of the mortgage, the lender must take a loss. No other assets are affected by a HECM mortgage: (Investments, second homes, cars, and other valuable possessions cannot be taken from the estate to pay off the mortgage.)
What is the Difference Between a Home Equity Loan and a HECM or Reverse Mortgage?
Typically, home equity loans, second mortgages, and home equity lines of credit (HELOC) have strict requirements for income and creditworthiness. Also, the homeowners must make monthly payments to repay the loans, and are responsible for property taxes, insurance, and maintenance.
Generally a HECM or reverse mortgage has no credit score requirements. The homeowner receives cash from the lender without being required to make payments. The homeowner is required to use the home as their primary residence, and is still responsible for property taxes, insurance, and maintenance.
The “available amount” above does not include closing costs and is an estimate based upon the information provided. The actual amount you receive is based on the age of the youngest borrower, current interest rates and the lesser of the appraised value of your home, sale price, or the maximum lending limit. A portion of the funds available to you may be restricted for the first 12 months after loan closing, due to HECM requirements. Consult a How Much A Month Advisor for detailed program terms.