Reverse Mortgages vs. HECMs
The Home Equity Conversion Mortgage (HECM) is a type of reverse mortgage that is federally insured and offered to those over age 62 amid a plethora of other tools that take on the name of a reverse mortgage. It’s easy to understand how the two can be easily confused. Continued reading to understand the relationship between HECMs and Reverse Mortgages.
What’s a Reverse Mortgage?
To put it in simple terms, a reverse mortgage is a loan. However, unlike regular loans, this allows homeowners to convert a portion of their home equity into cash, given that the homeowners are 62 years old or more. This type of loan can appeal to people who want to supplement their retirement funds. You can even use the proceeds from a reverse mortgage to pay off credit card dues or an existing mortgage.
Once you own a certain amount of equity, you can trade it for cash payments by getting a reverse mortgage. Many people use reverse mortgages to supplement their retirement income. While many types of reverse mortgages are available, one of the most popular ones is a Home Equity Conversion Mortgage (HECM).
Learn more about reverse mortgages.
What’s a HECM?
A HECM is a federally insured reverse mortgage. It allows you to do the most with your money. When you get approved, you essentially have a new line of credit that your property’s value covers. You can use the funds on month-to-month essentials like groceries or save up to go on an adventure or make a big-ticket purchase. There aren’t any restrictions on how you spend the money you get from your HECM.
Is a HECM a Reverse Mortgage?
Sometimes financial jargon can make it challenging for people to understand whether a HECM is the same as a reverse mortgage or something else entirely. In truth, a HECM is just one of the types of loans that fall under the reverse mortgage umbrella. HECMs are so popular that they make up the majority of reverse mortgages because they’re federally insured.
Other Types of Reverse Mortgages
While Senior Lending Corporation’s specialty is HECM loans, other reverse mortgage types you might find in your search include:
- Single-purpose reverse mortgages: With this type of reverse mortgage, how you spend the money you’re getting is much more regulated. It’s usually for home-related needs, such as renovations or repairs. Nonprofit lenders often offer these mortgages. They can be a good option for people that may not get approved for other types of reverse mortgages.
- Proprietary reverse mortgages: These are reverse mortgages offered by private lenders, and they are not backed by the government. The lending amount can be much larger than in HECM cases — they’re sometimes called jumbo loans.
What Makes a HECM the Right Choice for You?
If you’re exploring reverse mortgage options and considering a HECM loan, it’s good to know what an ideal candidate looks like. Many lenders prefer applicants that:
- Are 62 years of age or older
- Own their home or have a low enough mortgage balance that the HECM can absorb it
- Have the ability to pay property taxes, maintenance and insurance for the home
- Have received counseling and understand their responsibilities for the loan
Explore Your Options With Senior Lending Corporation
A HECM is an excellent choice for many retirees. See if you’re one of them by connecting with Senior Lending Corporation today! We want to help you live your retirement your way.
Contact us by calling 800-822-1190 or check online to see if you qualify. We’ll be happy to discuss your options and whether a HECM is your path to peace of mind for the future.
