H.E.C.M – Home Equity Conversion Mortgage
What is a HECM Reverse Mortgage?
Traditional reverse mortgages were established in 1989 to help older homeowners age in place. HECM stands for Home Equity Conversion Mortgage, better known as a Reverse Mortgage. It is a loan insured by the Federal Housing Administration (FHA). Borrowers who qualify can borrow against the home’s equity. As long as property taxes and insurance are paid, qualified homeowners will have optional mortgage payments for as long as they live in the home.
HECM Qualifications
- You must be at least 62 years or older
- You must have enough equity in your home
- You must continue to pay property taxes and insurance
- Your home must be your primary residence
- You must complete a counseling session with a HUD-approved counseling agency
HECM to HECM Refinance
If you already have a HECM, refinancing into a new HECM may allow you to access additional equity if the home has appreciated in value, add another borrower to the loan, or lower your interest rate.
When you refinance your existing reverse mortgage into a new one, this is called a HECM to HECM refinance (also known as a H2H Refi).
Why would someone refinance their HECM anyway?
The HECMs with Adjustable Rate Mortgages (HECM ARMs) have a built-in disincentive to refinance – the borrower’s net principal limit (how much they can borrow) continues to grow over time. This means that homeowners who have not borrowed all of their available funds have a growing line-of-credit that often makes refinancing unnecessary.
However, there are many reasons why a current reverse mortgage client may want to refinance into a new one. Here are just a few:
- A homeowner who is recently married may want his/her new spouse added to title and be listed on the note. With a H2H Refi, the new spouse would have additional protection that the reverse mortgage offers.
- Property values may have increased, offering the homeowner additional funds.
- A H2H Refi may be needed if the homeowner wishes to change loan programs (Fixed Rate or ARM), or if they wish to reduce their interest rate.
HECM For Purchase
Not many people realize that a reverse mortgage can be used to purchase a home. The HECM for Purchase is a Federal Housing Administration (FHA)-insured home financing program designed specifically for homebuyers who are age 62 and older. If you meet the down payment requirement, which is typically 45% to 55% of the purchase price, you may qualify to purchase a home with a reverse mortgage and have no monthly payments of principal and interest. As with any mortgage, the borrower must keep current with property-related taxes, insurance and maintenance as part of their ongoing loan obligations. If you qualify, you can buy your home and have optional mortgage payments.
JumboReverse
Jumbo Reverse Mortgages are loans that enable owners of high value homes to access greater amounts of their home equity than is available from the government insured HECM Reverse Mortgages. With a Jumbo Reverse Loan, you may access a loan up to $4 Million, depending on the value of your home. In California, this proprietary loan product is available to homeowners as young as 55. Enjoy your retirement sooner. And, unlike traditional reverse mortgage and refinance loans, Jumbo Reverse Loans do not require mortgage insurance, which can be a substantial savings. If you’re age 55 or older and own or are planning to buy a house or condo, we can help you create a financial roadmap today.
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