Video Transcription of “What is a HECM Reverse Mortgage and How Does it Work?“
For years, your home has been at the center of your life’s best memories. Now, at 62 or older, you can transform your home’s equity into financial flexibility, helping you enjoy the retirement you’ve always envisioned.
Meet the Home Equity Conversion Mortgage, or HECM, the most popular reverse mortgage and the only one insured by the Federal Housing Administration. A HECM allows consumers 62 and older to access a portion of their home’s value while continuing to live in and own the home they love.
With a HECM, there are no required monthly mortgage payments. Just cover essential property charges like taxes and insurance. You choose how to receive your funds: a lump sum, fixed monthly payouts, a flexible line of credit, or a combination of monthly payouts and a line of credit. Interest and mortgage insurance premiums are added to the balance over time with repayment deferred. Want to pay it down? You can make voluntary prepayments to help manage your balance.
A HECM helps unlock new possibilities. Use the loan proceeds to pay off your existing mortgage at closing, reducing your fixed monthly expenses. And the rest of the funds? That’s up to you. Maybe you want to renovate your home to age in place comfortably, pay off high-interest debt, cover medical or long-term care costs, or simply enjoy financial freedom for travel and personal goals. Some even use it to create a financial safety net for added peace of mind.
A HECM loan becomes due when the last borrower moves out permanently, is unable to live in the home for 12 consecutive months due to illness, or passes away. The loan is typically repaid by selling the home. But here’s the good news: HECM loans are non-recourse. You or your heirs will never owe more than the home’s value at the time of sale. FHA insurance covers any shortfall, ensuring financial protection for you and for your loved ones.
Your heirs have options when it comes to your home. If they would like to keep it, they can pay off the loan, usually by refinancing. If the loan balance is higher than 95% of the home’s value, they may qualify for a short payoff at 95% of the home’s value. If they don’t want to keep the home, they can sell it and keep any leftover proceeds. If the loan balance is more than the home’s value, they can walk away with no personal liability by signing a deed in lieu of foreclosure.
A reverse mortgage isn’t for everyone, but for many, it’s a powerful home loan that turns home equity into new opportunities. Your home has been your haven for years—now let it pave the way for your future.
