A home equity conversion mortgage, or HECM, is simply the Federal Housing Administration’s official term for a Reverse Mortgage. At C2 Financial, we offer three types of reverse mortgages, all of which are insured by the FHA. A HECM requires the borrower to be 62 years of age or older, have moderate to significant equity built up in their home (with the exception of the HECM for purchase loan), and use the home as their primary residence. Other than these requirements, loans can be customized to your individual needs.
The HECM Fixed Rate
A reverse mortgage fixed rate loan disperses money in one lump sum after the loan closes, with interest locked into a specific rate for the loan’s lifetime. These are excellent mortgages for people who need to pay for mandatory obligations, such as paying off mortgage balances and property liens, meeting repair requirements, and covering the closing costs associated with reverse mortgages. Money remaining after obligations are paid is available for the borrower’s immediate use.
HECM Line of Credit
One of the most popular types of reverse mortgage, the HECM line of credit is available to anyone who qualifies. With a line of credit, you can choose a number of ways to receive your money. You can
- Lower your closing costs by limiting your initial payout based on the FHA’s pre-determined limit.
- Opt for smaller amounts of cash disbursed on a monthly basis
- Have full access to your line of credit at any time
Your personal needs determine which option you choose. You can also select a combination of these options, such as receiving monthly payments with access to the full line of credit should you need it, making an HECM line of credit an extremely flexible reverse mortgage option. As an added bonus, an unused line of credit may grow over time.
HECM for Purchase
A “for purchase” mortgage differs from the previous loan options. Instead of allowing access to a home’s existing equity, for purchase loans allow seniors to buy a home with a reverse mortgage. Doing so allows the borrower to move into a new home with no monthly payments, providing seniors with opportunities to move closer to family or purchase homes which better meet their needs.
