The Home Equity Conversion Mortgage or HECM is the only federally insured reverse mortgage in America. It was created in 1988 when Ronald Reagan signed the reverse mortgage bill into law. Since then, the HECM has evolved to add more consumer protections. Today’s reverse mortgage product is a loan that allows homeowners, age 62 or older, to access a portion of their home equity. They can receive disbursements in cash, monthly payments, or a growing line of credit, all without the burden of a monthly principal and interest mortgage payment.

Yes. With a HECM, title remains with the homeowner(s). Ownership is not transferred to the lender at the loan closing or after the death of the last borrower. Because the borrower remains the owner, the home may be sold at any time without a prepayment penalty.

The borrower must occupy the home, maintain it, and pay all property-related charges. Failure to keep up with these required homeowner obligations could cause a homeowner to default on the mortgage and may even lead to foreclosure.

This feature of the HECM loan ensures that the homeowner will not be held responsible for mortgage debt that accrues beyond the home’s value. This can give the homeowner peace of mind that they will not be leaving their heirs with a bill. In short, the Federal Housing Administration (FHA) guarantees that neither the borrower nor their heirs will owe more than the home is worth at the time it is sold.

Yes. Ownership of the home can transfer to heirs through a will, a trust, a life estate, or any other method that conveys title to the home. However, the HECM loan must be repaid. Therefore, most heirs will obtain ownership and list the home for sale. Any residual proceeds after the sale of the home would be their inheritance. Keep in mind the non-recourse clause ensures the heirs will not be responsible for any deficiency.

There are non-HECM products that allow reverse mortgages for borrowers as young as age 55 in some states. However, the HECM product requires all borrowers to be age 62. Spouses who do not meet that age requirement are “non-borrowing spouses.” Since 2014, HUD regulations allow a deferral period for most non-borrowing spouses after the death or incapacity of the last borrower.

The more appropriate question is, “How much home equity do I need so that I won’t need to bring money to closing?” And we won’t know for sure until the home’s appraisal is complete. This is because the borrowing power of a HECM will depend on the property value, the age of the youngest borrower or non-borrowing spouse, and current interest rates.

With a HECM loan, the unused proceeds (after paying off existing liens and closing costs) are generally left in a line of credit (LOC). The HECM LOC is unique in that the available funds will grow at the same rate as the loan balance. This creates more borrowing capacity as the borrower ages. Furthermore, the HECM LOC is not capped, reduced, frozen, or eliminated because of market conditions or property value declines. This enables it to be relied upon for long-term financial planning.

With a HECM for Purchase, homebuyers can purchase a new residence using a HECM loan. In most cases, the homeowner is selling a current resident and upsizing to their dream home or downsizing to a new home that meets their retirement needs. Because Movement Mortgage contributes a portion of the sales price, the homebuyer can either retain more cash savings or increase their purchasing power all without a required monthly principal and interest mortgage payment.