A reverse mortgage is a loan from the U.S. Government for 50% to 75% of the value of a home owned by a homeowner aged 62 and older. Instead of making monthly payments to a lender, as with a regular mortgage, a lender makes payments to the homeowner. The funds from a reverse mortgage are tax-free. The loan doesn't have to be repaid in the homeowner's lifetime, however, when the homeowner dies, the money received plus approximately 4% interest is repaid by their estate. The loan is repaid when the homeowner ceases to occupy the home as a principal residence, due to the homeowner (the last remaining spouse, in cases of couples) passing away, selling the home, or permanently moving out.
Home Equity Conversion Mortgage - Reverse Mortgage
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US-01685BG
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The only reverse mortgage insured by the U.S. Federal Government is called a Home Equity Conversion Mortgage (HECM), and is only available through an FHA-approved lender. The HECM is FHA's reverse mortgage program that enables you to withdraw a portion of your home's equity.
The chief difference between a reverse mortgage and a home equity loan is that the reverse mortgage requires no payments.On a home equity loan, monthly payments are made until the loan is repaid, usually for a term of 30 years.
A home equity conversion mortgage (HECM) is a type of reverse mortgage that is Federal Housing Administration (FHA) insured.HECM terms are often better than those of private reverse mortgages, but the loan amount is fixed, and mortgage insurance premiums are required.
Inform the lender you have a reverse mortgage and want a HELOC. To take out a HELOC, you must have remaining equity in the home. Since you can't convert the reverse mortgage to a HELOC, you must pay off the mortgage. The loan balance can be rolled into the HELOC, resulting in a higher monthly payment.
What Is a HECM Reverse Mortgage? It is a loan to a senior secured by a mortgage lien on the senior's house, with most of the loan proceeds usually paid out over time rather than upfront, and with no repayment obligation so long as the senior lives in the house.
The general rule of thumb is that a reverse mortgage works better for someone who needs a long-term, steady source of income, while a home equity loan is better for someone who needs short-term cash that they can repay.
The Home Equity Conversion Mortgage (HECM) is Federal Housing Administration's. (FHA) reverse mortgage program which enables you to withdraw some of the equity. in your home. You choose how you want to withdraw your funds, whether in a fixed. monthly amount or a line of credit or a combination of both.