What are the eligibility requirements?
- Borrower(s) who are at least 62 years of age and occupy the property as their principal residence
- Eligible properties include single-family homes, condominiums and townhomes, or a 2-to-4 unit dwelling
- The home must be owned free and clear or you must refinance an existing mortgage balance into a reverse mortgage loan without the required monthly mortgage payments of a traditional mortgage. Repayment is required if the borrower(s) no longer reside at the property, taxes and insurance on the property are not kept current, the property is not maintained to FHA standards, or other program requirements are not satisfied.
- Generally, there are no income, employment or credit score requirements. Borrower(s) are required to obtain an eligibility certificate by receiving counseling from a HUD-approved agency: Family members to participate in these informative sessions.
What are some of the benefits?
- The HECM mortgage loan borrower retains ownership and lives in their home, as long as all other program requirements are met
- Loan proceeds can be used for any purpose including meeting daily and monthly expenses, or covering health care expenses
- Loan proceeds are not considered income and may not affect most Social Security or Medicare Benefits
What type of interest rate options are there?
- First Bank Mortgage provides both fixed and variable rate FHA-insured HECM loans
What are the distribution options?
With a variable-rate HECM loan, you can have flexible distribution options:
- A lump sum to cover large expenses
- Monthly advances to supplement income
- A line of credit to draw on as needed
- And with a variable rate option chosen you can even change how you receive your HECM proceeds as as often as your needs or your situation changes over time
With a fixed-rate reverse mortgage loan, a lump sum distribution is required* (ask about recent changes)
What are the costs with a HECM mortgage loan?
- A deposit for the appraisal is an out-of-pocket expense
- There are additional costs, such as an origination fee, title insurance, a mortgage insurance premium and attorney fees
- The borrower is expected to continue maintaining the property and paying the taxes and insurance premiums on the property
Home Equity Loan vs. a Home Equity Conversion Mortgage
With a home equity loan you make monthly payments until the loan is repaid. You must
also have a sufficient income to qualify and have excellent credit. You must make
monthly payments or you risk the possibility of foreclosure like any other ‘regular’
mortgage. Also, a home equity line of credit only allows you to draw on the funds for a set period of time only, and then full payments are required.
A new mortgage must pay off any mortgages in existence now and is not affected by
income or credit score. Additionally, there are NO monthly payments ever (as long as you continue to pay your property taxes and insurance)! You qualify based on the age of the youngest person involved and the value of the home that you continue to own.
Your funds are always available to you for the life of the loan. We can also handle a reverse mortgage transaction for a life estate or a trust.
Is a HECM Mortgage a good choice for everyone?
It is definitely a viable solution for many senior homeowners; but it is not right for everyone. It might even surprise you to hear us say that, but it is true. The HECM mortgage is really meant for people who want to remain in their homes. Like everything else, it is always good to learn, explore the options and weigh the facts.
A HECM mortgage may not be the right choice for you if you do not intend to stay in your home long term (generally less than a year). You wouldn’t necessarily buy a house if you planned to move out in one year. The same is true of a reverse mortgage. The value of the closing costs spread out over time makes it more cost effective over time. However, in only a year’s time you can’t spread out the costs. So, the longer you continue to live in the home, the more sense it makes.