We know what issues seniors face today. Are you on a fixed income? Is your Social Security sufficient? Do you have rising health care costs? Is your mortgage paid off? Could you use a cash reserve? If so, let us give you some facts on Reverse Mortgage, or Home Equity Conversion Mortgages, commonly Referred to as HECMs.
Homeowners 62 years or older who own their home, can convert home equity into proceeds. A unique feature of the HECM loan is the Mortgage Insurance Premium (MIP). The current FHA loan limit is $625,500. More facts include that the borrower keeps the home and retains title and ownership, while having the ability to sell at any time. There are no monthly principal and interest mortgage payments; however, homeowners must pay property taxes, homeowners association, insurance, and they must live in and maintain the home in good condition. HECM mortgages are typically FHA-insured, giving you peace of mind. Additional benefits includes the ability to pay off your existing mortgage with a reverse mortgage, continue your quality of life, and maintain financial self-reliance. Proceeds can be used for any purpose such as:
- In-home care
- Healthcare costs
- Home improvements
- Long-term care
- Home purchase
- Pay property taxes
- Pay insurance
- Emergency fund
- Supplement retirement
- Other living expenses
What are the HECM eligible property types?
- Single-family homes
- 2-4 unit properties
- FHA-approved condominiums
What are the borrower responsibilities?
Eligibility requirements need to be met. Some of them include:
- Age 62 years or older
- Pay property taxes on time
- Keep homeowner insurance
- Maintain home in good condition
- Live in the home as primary residence
- Property must be primary residence
- Home meets minimum FHA property standards
- Counseling – all homeowners are required to complete counseling session with an independent, third party counselor approved by the U.S. Department of Housing and Urban Development (HUD).
What are the Home Equity Conversion Mortgage (HECM) programs?
- HECM Standard
- HECM for Purchase
Please consult your local Open Mortgage Reverse Mortgage Professional for details. Rates and programs are market-driven and can fluctuate or change at anytime.
What are the factors affecting the payout amount determination?
- Mortgage program chosen
- Age of youngest borrower
- Appraised value of the home
- Interest rates
- Amount of equity in home
- Payout Options
What are the types of HECM programs payout choices?
Recent changes in regulations mandate the Adjustable Rate Mortgage with options as follows:
- Initial Draw
- Line of credit
- Monthly payment
- Any combination
When does the loan require repayment?
Repayment is required when the last surviving borrower sells the home; moves out permanently; or passes away.?Social Security and Medicare are typically not affected. Supplemental Security (SSI) or Medicaid is means-tested.
Note: We always recommend that borrowers consult their federal benefits administrators or financial advisors.
What are the Consumer Protections?
- HECMs are NON-RECOURSE Loans. Neither the borrower nor their heirs will owe more than the home is worth at the time it is sold. HECMs have no time limit. Since homeowners still own the property, they can always stay in the home provided they follow the program guidelines: pay property taxes and insurance, live in and maintain the home in good condition.
- HECM Counseling: borrowers are required to meet with an independent, third party counselor approved by HUD.
What are HECM for Purchase Programs?
This program allows for relocation to be closer to family, as well as downsizing to a more affordable space, or upsize to a dream home. You may decide to purchase a single level, more accessible home.
Note: HECM for Purchase is currently not available in all states
What is the Open Mortgage HECM for Purchase product offering?
- Proprietary Jumbo Reverse Mortgage: the only jumbo reverse mortgage loan available
- Home Value: $500,000 – $6 million.
- Payment: Lump sum at closing
- Fixed interest rate for the life of the loan
- No pre-payment penalty