Home Equity Conversion Mortgage (HECM)
A home equity conversion mortgage (HECM) is most commonly known as a reverse mortgage. Many people have seen commercials on television for this program directed at senior citizens. These mortgages can be provided by any lender who has been authorized to provide HUD-insured loans.
There are five payment options with HECMs:
1. Tenure: payments are provided from the lender as long as the borrower continues to live in the home.
2. Term: payments are provided for a fixed amount of time. That amount of time is selected by the borrower.
3. Line of credit: the borrower can make withdrawals as they wish up to the maximum amount.
4. Modified tenure: tenure and line of credit options are combined.
5. Modified term: term and line of credit options are combined.
To qualify for a reverse mortgage, the borrower must be at least 62 years old. They also have to use the property as their primary residence. If there is a lien on the property, it must be small and able to be paid off once the reverse mortgage is settled. The reverse mortgage uses the equity in a person's home to provide the monthly payments.
If you are interested in a home equity conversion mortgage, your real estate agent can provide you with more information. While this is a great option for many seniors who own their home, it is not the right choice for everyone. Speak to an experienced real estate agent for assistance in making your decision.