When you have a regular mortgage, you pay the lender every month to buy your home over time. In a reverse mortgage, you get a loan in which the lender pays you. Reverse mortgages take part of the equity in your home and convert it into payments to you – a kind of advance payment on your home equity. The money you get usually is tax-free and can be used for anything from taking vacations to paying medical bills….see if a Reverse Mortgage is right for you!
Home Equity Conversion Mortgage (HECM)
A Home Equity Conversion Mortgage (HECM) is a reverse mortgage that is backed by the Federal Housing Administration (FHA). The HECM is the only type of reverse mortgage that is federally insured and currently makes up the large majority of reverse mortgages in the United States. Seniors interested in a HECM must meet a few qualifications in order to apply.
HECM Borrowers must:
Lenders will also need to review a borrower’s income, expenses, and credit history. The FHA also requires the borrower’s property to meet specific standards and flood requirements.
Different payment plans are available depending on the needs of individual borrowers. The type of disbursement available will depend on whether a fixed or adjustable-rate option is selected. Fixed-rate reverse mortgages are available only as single disbursement lump sum payments. More options are available to the borrower with adjustable-rate reverse mortgages including: