Home Equity Conversion Mortgage (HECM) Loans          

The HECM loan has been improved over the years so that it can better meet the needs of older adults. Today, there are important safeguards in place to ensure that it can continue to help consumers for years to come.


How does it work?

With a traditional HECM loan, borrowers can access their home equity and defer payment of principal and interest, so long as they continue to comply with loan terms.


The HECM, also known as a “reverse mortgage”, is unlike a traditional loan where the borrower makes payments to the lender. With the HECM loan, the lender makes payments to the borrower and the loan is typically repaid when the last borrower or eligible non-borrowing spouse passes away or leaves the house.  This federally-insured loan offers multiple ways to receive the proceeds and gives you the ability to spend the cash as needed.

Common uses of Reverse Mortgage loans include:

  •         Converting your home’s equity into monthly payments to supplement income and maintain your standard of living in retirement.

  •         Using the monthly or lump sum payments from a reverse mortgage loan or the proceeds from a refinance loan to supplement your social security and other income without tapping into your investment portfolio.

  •         Getting rid of your monthly mortgage payment2and finance renovations so your home continues to meet your needs. (Borrower must continue to pay property taxes, homeowner’s insurance, and maintain the home.)

  •         Using a Reverse for Purchase to buy a new house that fulfills all your retirement needs without a monthly mortgage payment2.

  •         Establishing a standby HECM line of credit that will grow over time and help cover you.

  •         Eliminating your monthly mortgage payments2 and access cash so you can afford to enjoy the next phase of life.

 

Important features of a HECM loan include:

  •         You must complete HECM counseling with an independent counseling agency.

  •         You must undergo a financial assessment to ensure you are able to meet the financial obligations of the loan, which includes the ability to pay your property taxes and homeowners insurance.

  •         If your spouse is younger than 62, they can qualify as an eligible non-borrowing spouse and remain in the home even if you leave or pass away, so long as they continue to meet all loan obligations 3.


*You cannot lose your home under normal circumstances and so long as you pay your property taxes, homeowner’s insurance, maintenance costs and otherwise comply with the loan terms.

 

Qualifications include:

  •         You must be at least 62 years old.
  •         You must own your home.
  •         The home must be your primary residence.

 

Looking For More Information? Call 860.606.0099 or Email info@ctlib.com

 

References:

¹Annual HECM Endorsement Chart. NRMLA. https://www.nrmlaonline.org/2018/09/19/annual-hecm-endorsement-chart. August 2018.

2Borrower must continue to pay property taxes and homeowner’s insurance, maintain the home, and otherwise comply with the loan terms.

3If you qualify and your loan is approved, a HECM Reverse Mortgage must pay off your existing mortgage(s). With a HECM Reverse Mortgage, no monthly mortgage payment is required. Borrowers are responsible for paying property taxes and homeowner’s insurance (which may be substantial). We do not establish an escrow account for disbursements of these payments. A set-aside account can be set up to pay taxes and insurance and may be required in some cases. Borrowers must also occupy home as primary residence and pay for ongoing maintenance; otherwise the loan becomes due and payable. The loan becomes due and payable when the last borrower, or eligible non-borrowing surviving spouse, dies, sells the home, permanently moves out, or defaults on taxes and insurance payments, or does not comply with loan terms.  Call 1-860-606-0099 to learn more. A Reverse Mortgage increases the principal mortgage loan amount and decreases home equity (it is a negative amortization loan). These materials are not from HUD or FHA and were not approved by HUD or a government agency.