Unlock your home’s equity
and open the door to possibilities in retirement.
What is a “HECM” Reverse Mortgage Loan?
Specifically designed for homeowners aged 62+, a reverse mortgage is a home loan that allows borrowers to convert a portion of the equity they have in their home into cash. Home Equity Conversion Mortgages (or HECMs) are by far and away the most common type of reverse mortgage. HECMs are the only reverse mortgages insured by the Federal Housing Administration (FHA), and you can only get one through an FHA-approved lender like Fairway.
Increased cash flow.
You can access cash from a portion of your home equity without incurring income tax* (generally, it won’t affect your Social Security and Basic Medicare benefits). You can use the funds how you want.
* This advertisement does not constitute tax advice. Please consult a tax advisor regarding your specific situation.
Flexible repayment feature.
You have the option to repay as much or as little of the loan balance each month as you would like, or you can make no monthly mortgages payments at all. Of course, you must still maintain the home and pay homeowners insurance and property taxes, just like a traditional mortgage.
The FHA guarantees no repayment of the loan is required until the last borrower moves out or passes away. When you move out of your home, you or your estate has up to 12 months to repay the loan balance, which is typically achieved by selling the home.
The FHA guarantees that if the balance on the loan exceeds the home value at the time the home is sold, neither you nor your heirs will be responsible for paying the deficit (the FHA will pay it). If there are excess proceeds from the sale of your home, you (or your heirs) would receive them.
- You remain on the title and you own the home.
- You can sell your home at any time.
- Line of credit growth feature.
With a HECM reverse mortgage line of credit, the unused portion of the line of credit will grow each month at the same rate as the loan balance. In other words, you will have access to even more funds over time, regardless of home value.
Common Uses of a Reverse Mortgage:
- Refinancing your existing mortgage. If you are carrying mortgage in retirement, refinancing to a reverse mortgage eliminates your obligation to make required monthly mortgage payments. You must maintain the home and pay your homeowners insurance and property taxes.
- Supplement cash flow with a steady stream of funds
- Bridge the Medicare gap from age 62 to 65
- Use as a standby line of credit
- Fund major expenses, such as in-home care or home renovations
- Debt consolidation
DID YOU KNOW? You can also use a reverse mortgage to buy a new home that better fits your needs in retirement. This home financing option is called a HECM for Purchase.
Ways Loan Proceeds be Taken:
- A lump sum payout
- Fixed monthly advances
- Tenure (life of the loan)
- Term (set period of time)
- A line of credit
- A combination of monthly payments and a line of credit
The borrower(s) must:
- Be 62 years or older
- Live in the home as his or her primary residence and either own the home outright or have significant equity in the home
- Meet minimum credit and property requirements
- Must receive reverse mortgage counseling from a HUD-approved counseling agency
- Must not be delinquent on any federal debts
- Single family residence
- 2- to 4-unit properties
- Manufactured homes
- Modular homes
- Planned unit developments
- FHA-approved condominiums
To learn why cash may be a better option than sitting on a ton of home equity in retirement, watch this brief explainer video.
Let’s start a conversation.
If you are interested in the reverse mortgage loan, contact us today. Our experienced team of Reverse Mortgage Planners will help you to understand the HECM product, so you can make an informed decision about whether it is the right financial solution for you.