Home Equity Conversion Mortgage (HECM)

In recent economic times, exotic home loan products have become increasingly more common.  As there are shifts in the economy, certain home loan products start to become more popular.  One of these products in particular caters to a certain niche in the market and has been found throughout the state of Florida.  This would be because of who qualifies for this type of home loan.  This home loan product is called a Home Equity Conversion Mortgage.

Home Equity Conversion Mortgage:

A Home Equity Conversion Mortgage (HECM) is also known and referred to as a Reverse Mortgage.  Unlike a typical home loan product that uses a person’s credit and income for qualification purposes, this FHA insured mortgage instead uses the equity the homeowner has in the home as well as the age of the homeowner.  Their age must be 62 years or older to qualify for this type of loan.  Important to note, the older the homeowner, the higher the loan-to-value (LTV) ratio considered.

Each month the only payment that is made is one that covers the taxes and insurance on the home.  Therefore, this is not a loan that amortizes with a typical principal and interest payment each month.  Instead, the loan is repaid at the time of death through Due on Death terms.

There are three ways someone with this type of loan would receive their money.  The first way is through a one time lump sum.  This type of allocation would be common for someone who needs a large sum of money immediately.  The second way would be through a monthly annuity payment.  This is more common for someone on a fixed income and needing to find a way for an additional source of income.  This allows some security to the individual by having a guaranteed annuity payment each and every month.  The last way someone with this type of home loan would receive their money would be through a Home Equity Line of Credit (HELOC).  This option would be for someone who wishes to have the freedom of drawing funds at their convenience.  As I have mentioned in other blogs, all HELOC’s are not created equal.  It is imperative that before someone chooses this method of payment, that they first fully research the terms behind such a method.

Not sure who to call or where to start? Contact me today for a 100% free no-obligation loan inquiry analysis.

Matt Pell,  Loan Officer
Mortgage Warehouse, LLC
(239) 672-8502 – Direct Line
(239) 344-9223 – Fax
Matt@mortgagewarehouse.com
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Company NMLS ID – 137154
Individual NMLS ID – 1018529
Better Business Bureau Rating = A+