What is a HECM?
- The Home Equity Conversion Mortgage, or HECM, is a mortgage loan specifically designed for homeowners 62 years and older.
- It allows borrowers to convert a portion of their home equity into liquidity without:
- Giving up title to their home
- Meeting the underwriting guidelines of traditional mortgages
- Taking on a monthly payment
- While there are no pre-payment penalties, the reverse mortgage comes due when the last remaining borrower or eligible non-borrowing spouse no longer lives in the home as their primary residence.
HECM Fixed Payout
- One draw at funding
- Funds beyond the initial disbursement limit are forfeited
ADDITIONAL FEATURES
Mandatory obligations will exhaust the available proceeds.
Seek a predictable interest rate for the life of the loan.
Are not interested in a line of credit.
May wish to make periodic voluntary prepayments.
HECM ARM Payout
- Line of credit
- Tenure payment
- Term payment
- Any combination
- Modified tenure = LOC + tenure
- Modified term = LOC + term
INDEX and RATE CAPS
- Lifetime: 5% or 10% Cap
- No Periodic Cap
ANNUAL ADJUSTABLE
- Lifetime: 5%
- Periodic: 2%
MOTHLY PAYMENTS
Tenure Payments
- The borrower will receive an equal monthly cash advance for the life of the loan.
- Tenure payments combined with a LOC = Modified Tenure
Term Payment
- The borrower will receive an equal monthly cash advance for a specific number of years.
- Term payments combined with a LOC= Modified Term
