Definition and benefits of Home Equity Conversion Mortgage (HECM)
To provide additional housing finance options for senior homeowners, the
US Department of Housing and Urban Development (HUD) provides reverse mortgages under the Home Equity Conversion Mortgage (HECM) program. These mortgages are
available from HUD-approved lending institutions, like SCME Mortgage Bankers,
Inc., and are insured under the government's Federal Housing Administration
(FHA) insurance program.
To help you learn more, we have provided the following answers to some
of the most commonly asked questions about the program.
Q: What are the benefits of a reverse mortgage?
A:· Get tax-free funds for as long as you live in your home.
· No loan repayment for as long as you live in your home.
· No
income, medical or credit requirements.
· Retain ownership of your home
for life; this is guaranteed as long as you maintain your home, use it as your
primary residence, and make timely homeowner's insurance and property tax
payments.
· Choose a cash flow plan tailored to your needs.
·
Retain your personal and financial independence.
Q: What is a HECM?
A: A HECM is a special type of mortgage that enables you, as a mature
homeowner, to tap the equity you have in your home. It can provide the maximum
amount of flexibility to address your particular financial needs -whether it is
a lump sum to pay an unexpected hospital bill or a stream of regular payments
to supplement your monthly income. Unlike traditional home equity loans, no
repayment of the HECM loan is required until you no longer occupy the home as
your principal residence. At that time, the lender, with HUD's permission, will
declare the mortgage due and payable.
With a HECM, you borrow against the value of your home, and receive loan
proceeds according to the payment plan that you select. These plans are
described on the following pages. As a borrower, you are permitted to change
payment plans at any time after origination. You may change payment plans as
many times as you wish.
When you sell your home or vacate it for other reasons, the loan
balance, which includes the total amount you borrowed plus accrued interest and
mortgage insurance premiums, is due and payable, usually from the proceeds from
the sale of your home. Any proceeds in excess of the amount owed the lender
belong to you or to your estate.
