A Home Equity Conversion Mortgage (HECM) is the formal name of the federally-administered loan that many commonly refer to as the 'reverse mortgage' loan. The Home Equity Conversion Mortgage is administered by H.U.D. (The Department of Housing & Urban Development) and may help qualified homeowners 62 and older enhance their cash flow during retirement.
Reverse mortgage borrowers retain ownership and title to their home*. It’s yours just as it was before, but now you may benefit from the equity that’s been building in your home for years.
In addition, HECM (Home Equity Conversion Mortgage) reverse mortgage loans give you peace of mind since it is insured by the Federal Housing Administration (FHA) if your home and property are the only assets that secure the loan.
In order to retain the home when the reverse mortgage becomes due, the heirs may choose to keep the home by paying 95% of the home's appraised value, less customary closing costs and real estate commissions.
After you get a reverse mortgage on your primary residence, repayment is not due until the home is sold, the last borrower passes away or permanently leaves the home.
Borrowers also must keep the home in good condition, pay property taxes and keep homeowner’s insurance coverage to avoid the loan becoming due and payable.
As a protection, all those seeking a reverse mortgage are required to obtain counseling (from an independent HUD-approved third-party counselor) prior to incurring any costs associated with the loan (other than the counseling fee).
While proceeds from a reverse mortgage are not subject to personal income taxation, borrowers should seek tax advice on how proceeds may affect government needs-based programs such as Medicaid and Medi-Cal.