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Is a Reverse Mortgage Right For You?

HECM reverse mortgage

Simply put, a reverse mortgage allows a homeowner to supplement retirement using the equity in their home.

Usually when a person enters retirement they receive less income than they did in the work force and their cost of living increases. As such, a reverse mortgage can benefit many retirees.

A Home Equity Conversion Mortgage, or HECM, is the only reverse mortgage backed by the federal government and is only available through FHA approved lenders.

What makes HECM so special is that it is backed by the federal government and there will never be any balloon payments (negative amortization).

Borrowers of a HECM can receive payment in these ways:

  • Line of Credit

This payment method allows the homeowner to access funds as they need it by written request. A unique feature of this option is that the unused portion grows over time because of appreciation.

  • Term Payment

A term payment is exactly what it sounds like. It’s a fixed payment that is scheduled monthly for a set period of time.

  • Tenure Payment

Similar to a term payment, this option gives the homeowner fixed monthly payments. The difference is that this option does not have a set amount of time and will continue as long as the homeowner lives in the home or until they pass away.

  • Modified Payment

A modified payment can either be a combination of a line of credit and a term payment or a combination of a line of credit and a tenure payment. This allows the homeowner to receive fixed monthly payment and have the option to access funds a as a line of credit when they need.

  • Lump Sum

With this option, a homeowner will access all of their available funds at the time of closing. Many choose this option to pay off a large existing mortgage or to use the HECM for purchase program.

What are the qualifications?

  • You must be a homeowner

  • At least 62 years old

  • Paid off or considerable paid down your mortgage

  • Currently living in the home

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