Reverse mortgages and home equity conversion mortgages (HECMs) are loans for seniors. Retirees often use them to supplement other income, such as Social Security. Reverse mortgages are a broad loan category, and HECMs are a particular loan type within that category.
A reverse mortgage is a loan for homeowners who are 55 or older. They can use the equity in their home to receive funds. The payment typically comes in a lump sum, and the balance on the loan accrues interest over time. Those who take out a reverse mortgage don’t need to make monthly payments, and the home title remains in the homeowner’s name. There are two main types of reverse mortgages:
A reverse mortgage is an option for older individuals who own their homes or have a low mortgage balance. Homeowners with a remaining balance must pay it when they close the loan. The borrowing limits vary based on age, the home value and current interest rates. Before borrowing, homeowners must undergo counseling.
As long as the borrower occupies the home, they don’t need to repay the loan, though they must still pay property taxes, insurance and association fees. Reverse mortgages are also nonrecourse loans, meaning homeowners or heirs never owe more than what the home is worth.
HECM stands for home equity conversion mortgage. An HECM loan is a different variety of reverse mortgage it is insured by the Federal Housing Administration (FHA), which offers protection for borrowers and heirs. HECM funds pay off the loan balance on a home. Then, the remaining money goes to the homeowner. HECMs have no monthly mortgage payment, but the loan accrues interest over time.
An HECM works much like a typical reverse mortgage. It typically supplements the income of those preparing for or in retirement. They don’t need to make monthly payments when they borrow the money, though they may choose to make payments to reduce interest or loan balance. Like a reverse mortgage, the loan requires repayment in these situations:
Since the FHA insures it, this loan has a maximum limit for single-unit properties of $1,149,825 in 2024. The limit increases for duplexes, three-unit and four-unit properties. It also requires counseling from a counselor approved by the U.S. Department of Housing and Urban Development.
To take out an HECM, a borrower must meet the following requirements:
A proprietary or jumbo reverse mortgage typically suits those who own high-value homes since an HECM has a cap on what you can borrow. This loan has no FHA regulations or mortgage insurance. Typically, proprietary reverse mortgages have lower upfront costs.
As a type of reverse mortgage, HECMs have many similarities with a reverse mortgage. They also have particular differences, including:
Whether you take out an HECM or another type of reverse mortgage, you won’t need to repay the loan as long as you remain in the home. If you move or pass away, you or your estate must settle the loan balance. Several options exist for repayment, including refinancing the house for the outstanding loan amount or selling the home and keeping any remaining proceeds.
You can trust us to give you reliable information about reverse mortgages because our reverse mortgage company has worked with senior homeowners to secure HECMs for many years. Each management team member receives extensive training relating to reverse mortgage programs so we can advise on options that meet your needs and goals. We will guide you toward a lending option that gives you the most value for your golden years.
Beyond providing expertise related to HECMs, we keep your best interests in mind. We work hard to educate you about your options, providing transparent lending advice that gives you confidence and trust in us. Our past customers speak highly of our relationship-focused team that takes the time to clearly explain reverse mortgage details and answer your questions.
Senior Lending Corporation offers HECMs, allowing you to use your home equity to enhance your retirement. This federally insured reverse mortgage provides cash access for everything from paying off credit card debt to making home improvements to paying medical bills. Learn more about HECM loans versus reverse mortgages and how to qualify and apply by calling 800-822-1190.
