A HECM is a Home Equity Conversion Mortgage, often referred to as a government insured Reverse Mortgage, that serves as a vehicle to help retirees and seniors access home equity from their homes in retirement.
Home equity can be accessed in various ways depending on homeowner or family needs. Lump sums at closing can be used to pay off existing forward mortgages. Credit lines, much like traditional home equity lines, can be established for convenience or emergencies. A big difference that distinguishes a HECM Reverse credit line from a traditional home equity line is that there are no monthly principal and interest payments and the lender cannot cap or revoke your credit limit in the event of declining home value.
In conjunction with a credit line, a HECM can be used to supplement retirement income. Term payments, such as ten year plans, and tenured annuity-like payments that span the life of each homeowner can also be configured as a funding option with a HECM Reverse Mortgage.
The HECM is complex and often misunderstood (see our myths and misconceptions page where we explain many of these myths with facts). For those that make the effort to understand the program and all its benefits, the rewards can be financial stability, diversification of assets, estate planning benefits in the event you outlive your home equity and want to protect your heirs and estate, and a more financially sound retirement yielding a higher quality of life without the constant insecurity of outliving your retirement money.
A key benefit that is most misunderstood is that you can outlive your home equity by an infinite amount and still stay in your home for your life and the life of your surviving spouse. To be eligible for a HECM Reverse Mortgage you must be 62 years old, have a home that is acceptable to FHA standards, and it must be your primary residence.
George H. Omilan
President-CEO - NMLS# 873983
Jefferson Mortgage Group LLC
Helping seniors with Reverse Mortgages in Virginia, Maryland and Pennsylvania.
Questions/Comments encouraged.