What is a Home Equity Conversion Mortgage aka HECM anyway?

The many faces of active adults.

Simply put it's a loan with no monthly payments due

A Home Equity Conversion Mortgage aka HECM, gives the homeowner age 62+ access to the accumulated equity from the payments they have made and the equity increases in market value over time without having to pay the lender or bank back until the last homeowner passes or no longer lives in the home.

Eliminate your existing mortgage or other obligations

You must pay off any existing mortgage on the home, you can also pay off any other obligations, such as car loans, credit cards, medical bills, etc., eliminating monthly payments.

Create a stream of monthly cash tax free

Any remaining funds from your loan not used to pay off other debts can be taken in a few different ways:

1.  One-time, tax free lump sum payment

2.  Steady, tax free monthly payments

3.  Line of credit as a "Safety Net" to use later

4.  A combination of all of the above

As always consult with your tax professional or financial consultant for any effect on taxes or government benefits.

The money is yours to use, any way you want

*  Eliminate or reduce credit card or other debts

*  Make home updates, repairs or modifications to meet your needs

*  Have more money on hand to meet everyday expenses and bills

*  Pay for healthcare expenses, making it easier to age in place in your home

*  Establish a line of credit for emergencies or other expenses

*  Pay for long-term care needs now or in the future

*  Help a child or grandchild with major expenses, such as college tuition or a down payment

*  Take a once in a lifetime vacation with your family

*  Or any other purpose you have in mind

You still own your home

Having a HECM mortgage does not mean giving up ownership or extra equity or future market value increases.  It's your home to live in until you decide to move out or you pass on.  You can sell at any time or pass on to your heirs when the time comes.  

You are required to:

*  Live in the home as your primary residence

*  Pay required property taxes, hazard insurance and HOA dues if applicable

*  Keep the home in good repair according to Federal Housing Administration requirements

Your heirs can retain ownership or sell

When the home passes to your heirs, if that is your decision, the money to repay the bank usually comes from the sale of the home.  However, your heirs have the option to arrange their own financing to pay off the bank, or use available cash funds and retain the home to live in or use as an investment.

And neither your estate or your heirs can be forced to repay the bank more than your homes current market price.  FHA insurance is part of every government insured HECM mortgage, and that insurance makes up any shortfall that may be there at settlement.  Nobody has to write a check to make the bank whole.

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David A Weaver, NMLS #228406

Scottsdale, Arizona 85255, United States

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