HECM Loans
What is a HECM loan?
HECM is an abbreviation for Home Equity Conversion Mortgage. A HECM is an FHA-insured reverse mortgage that allows qualified homeowners 62 and older to borrow a portion of their home's value. Home equity can be tapped in a variety of ways, providing the borrower with more cash flow. Consider living in your home without a regular monthly mortgage payment¹, instead receiving monthly loan earnings from the years you've invested in it. After obtaining a reverse mortgage on your principal house, repayment is deferred until the home is sold, the last borrower dies, the borrower permanently leaves the home, or the borrower fails to comply with the loan terms. Borrowers must also keep the house in excellent repair, pay property taxes, and maintain homeowner's insurance coverage to keep the loan from becoming due and payable. Please see our reverse mortgages page for HECM criteria. A reverse mortgage is a special mortgage created for homeowners aged 62 and up. You may have access to a portion of your house's value as well as the freedom and comfort of the home you've known for many years. It's your house; now put it to work for you.
*Borrowers are still required to pay property taxes, homeowner's insurance, and home upkeep charges.
Features, Advantages, and Qualifications
Borrowers with a reverse mortgage keep ownership and title to their home. It's still yours, but you might benefit from the equity that's been accumulating in your home for years. Furthermore, because your home and property are the sole assets that underpin the loan, HECM (Home Equity Conversion Mortgage) reverse mortgage loans provide you with peace of mind. The Federal Housing Administration (FHA) insures HECM loans. The FHA requires a Mortgage Insurance Premium (MIP) to be collected at closing and during the loan's term. These premiums are added to the borrower's loan balance. The upfront Mortgage Insurance Premium (MIP) is computed at closing using your home's appraised value up to a maximum of $1,089,300 (the 2023 nationwide HECM limit). The monthly FHA insurance premiums are computed based on the outstanding loan balance.
This insurance provides debtors and their children with the following benefits and peace of mind:
The borrower(s) are not obligated to pay more than the fair market value of the residence.
If the loan sum exceeds the home's worth, the FHA reimburses the lender when the estate sells the residence.
The FHA insures lender payments made to the borrower. If the lender is unable to continue making payments, FHA will make them.
The lender cannot seize title if the loan sum climbs and surpasses the home's current market value. The FHA guarantees that borrowers can reside in their house as long as fundamental loan conditions are completed (homeowner's insurance is in place, property tax payments are due, and the home is kept in excellent shape).
When the reverse mortgage comes due, the heirs may pay up to 95% of the home's appraised value, less customary closing costs and real estate fees.
A reverse mortgage allows you to access the equity in your home without selling it.
You reside in a house that has appreciated in value over the years. You may struggle to keep up with bills and healthcare costs. You're confronted with a choice: sell the house—your home, which has no monetary value—or continue to live in it and watch your financial load grow. Consider this quandary resolved.
A reverse mortgage loan allows you to borrow a portion of your home's value without having to sell it and may provide you with monthly cash flow payments. The loan is repaid when you sell your property, the last borrower dies, you no longer live there as your primary residence, or you fail to meet the loan terms.
You can utilize the loan proceeds however you want: to supplement and extend your retirement, to make house modifications, to pay expenses, and so on. It's entirely up to you.²
As a precaution, anyone considering a reverse mortgage must first seek counseling (from an independent HUD-approved third-party counselor) before incurring any loan charges (other than the counseling fee). While reverse mortgage payments are not subject to personal income taxation, borrowers should seek tax counsel on how they may affect government needs-based programs such as Medicaid and Medi-Cal.²
¹This advertising is not intended to provide financial advice. Regarding your specific situation, please consult a financial expert. Certain events will cause the loan to mature and the balance to become due and payable. Borrowers must continue to pay property taxes, homeowner's insurance, and keep the property up to HUD standards. Failure to do so may result in the debt becoming due and payable. Credit is conditional on age, income, credit history, and property qualifications. Rates, fees, terms, and conditions for the program are not available in all states and are subject to change
.²Borrowers should seek professional tax guidance on the proceeds of a reverse mortgage.
This material is not provided by, nor was it approved by the Department of Housing & Urban Development (HUD) or by the Federal Housing Administration (FHA). It is not intended to be a substitute for legal, tax, or financial advice. Consult with a qualified attorney, accountant, or financial advisor for additional legal or tax advice.
*There are some circumstances that will cause the loan to mature and the balance to become due and payable. The borrower(s) must continue to pay for property taxes and insurance and maintain the property to meet HUD standards or risk default. Credit is subject to age, minimum income guidelines, credit history, and property qualifications. Program rates, fees, terms, and conditions are not available in all states and subject to change.
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Mortgage Specialists
NMLS #350697
8050 Florence Ave. Suite 210
Downey, CA 90240
Phone: (949) 990-3185
Work Phone: {949) 990-3185
Cell Phone: (949) 990-3185
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