Learn the Basics of a Reverse Mortgage



What the HECM is a Reverse Mortgage?

When it comes to reverse mortgages, there are a lot of acronyms to know. And trying to decode all of them has the potential to leave you feeling as if you’re drowning in alphabet soup. Fortunately, Longbridge Financial is here to help. And if there’s one acronym to start with it’s this: HECM.

HECM is short for Home Equity Conversion Mortgage – also known as a reverse mortgage. HECMs allow homeowners aged 62 and older to convert a portion of their home’s equity into cash without having to sell or leave the home. Insured by the Federal Housing Administration (FHA) since 1988, today’s reverse mortgages come with consumer safeguard measures, contrary to the common misconceptions and bruised reputation based on earlier years.

Unlike a traditional mortgage, where borrowers must begin repaying the loan right away, homeowners do not have to repay funds received through a HECM until a maturity event triggers repayment of the loan, such as after the final borrower no longer lives in the home as their primary residence or becomes unable to meet the loan terms. Better yet, there are no monthly mortgage payments required so long as the borrower(s) continue to pay their property taxes and homeowners insurance and maintain the home. With a reverse mortgage, you can pay as little or as much as you want, as often as you’d like. If you have an existing mortgage on your home, the proceeds from the reverse mortgage are first used to pay off that loan. And since mortgage payments on the reverse mortgage are optional,1 you can eliminate that expense and leverage the remaining cash for what matters most to you.
Now for the question on everyone’s mind – how much money can you expect to receive from a HECM? The short answer, it depends. While the FHA sets a national lending limit for the HECM reverse mortgage program, the amount of home equity you’ll be able to access is calculated by accounting for several variables. For example, the amount of proceeds known as the “principal limit” will depend on factors like your age, home value, current interest rate, and payout distribution method. Great news though, you can choose to use the proceeds however you wish. Some common uses we see among borrowers include paying bills, offsetting healthcare costs, making “aging in place” modifications to their homes, establishing a financial “safety net” for the future, or helping loved ones with large expenses.

So, who can qualify? There are many factors that determine eligibility. For example, HECMs are available to homeowners 62 or older with sufficient equity in their homes. Another eligibility factor is that you must continue to live in the home as your primary residence and meet minimum property standards as set by HUD. However, in some instances, you may be able to use your HECM proceeds to pay for any required repairs to meet these standards.

If you’re interested in tapping into your home equity with a HECM, you may find yourself wondering what exactly the process entails. The first step is to work with a reputable reverse mortgage lender and loan officer to help you decide if the loan is right for you.
Ryan Philip, CRMP is a local Reverse Mortgage Consultant with Longbridge Financial. As a Certified Reverse Mortgage Professional (CRMP), Ryan has earned the highest designation from the National Reverse Mortgage Lenders Association and has made a commitment to follow the highest ethical standards when educating others on reverse mortgages. Ryan and the Longbridge team prioritize exceptional service. In working together, we’ll get to know you, and take the time to understand your situation, so we can offer solutions that are tailored to your needs. Not all lenders make that commitment.

Ryan Philip
Reverse Mortgage Consultant, CRMP
NMLS #418795
Office: (551) 252-4597
Cell: (201) 618-3835

Branch Office: 1 International Blvd., Suite 900, Mahwah, New Jersey 07495. Branch NMLS #957935.
1Keeping current with real estate taxes, homeowners insurance, and property maintenance required.
This material has not been reviewed, approved or issued by HUD, FHA or any government agency. The company is not affiliated with or acting on behalf of or at the direction of HUD/FHA or any other government agency.

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