Home Equity Conversion Mortgage

The Home Equity Conversion Mortgage (HECM for short) is amongst one of the most popular types of Reverse mortgages for seniors, that allows them to release equity in their home in a number of different payment options.

It was created by the U.S. Department of Housing and Urban Development, (HUD for short) to be able to give seniors more financial security to pay for home improvements, to go alongside social security payments or to pay for any unexpected expenses that may arise.

To qualify for a Home Equity Conversion Loan, you must be 62 or older and either completely own the property or have a small amount outstanding on the loan that can be paid off with proceeds of the Home Equity Conversion Mortgage loan. The home you are using to gain equity must be your chief dwelling. Before taking out the HECM plan, you must also have counseling. This must be with a HUD approved counselor that specifies in Home Equity Conversion Loan.

You must also have an home that is eligible to apply for a Home Equity Conversion Mortgage and these are generally single family detached homes or town houses, or a 2/4 unit single family property where one of the units is owned by the borrower or borrowers.

The maximum claim for the loan is worked out my three factors. These are the age of the person wishing to take out a Home Equity Conversion Loan, the interest rates and the value of the property.

There are a number of ways that you can choose to receive payments once you have successfully taken out a Home Equity Conversion Plan mortgage. You could choose for a set monthly payment delivered for the complete length of time that you still own and live in the property. This is called a “Tenure” plan. You could also choose to have a monthly payment that you receive for a number of years chosen by you at the beginning of the plan. This is called the “Term” plan. You could also decide to have a certain amount delivered at either unscheduled times or in one lump sum in amounts that you decide until you have reached your credit maximum. This is generally called the “Line Of Credit” plan. Additionally, you could combine the above three into a payment plan that most suits your needs and expectations.

As with any mortgage claim, there are certain costs that must be paid, and in the case for the Home Equity Conversion Loan, these are normally: origination fee, third-party closing fees, loan servicing fees and the interest. These are generally financed with proceeds from the Home Equity Conversion loan.

This is an ideal loan for seniors that are planning home improvements or vacations or just want a safety net should anything happen and any unexpected bills arise. You get to keep your own home, and receive money from the equity. There are no monthly payments to be made out by the borrower, apart from obviously bills and taxes. This gives seniors the peace of mind to be able to enjoy life, knowing that the loan will be paid off in full, should anything happen or they sell the property by the house that they are residing in.