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Have you asked yourself this question? The Home Equity Conversion Mortgage (HECM) is FHA's reverse mortgage program. This plan enables a homeowner 62 years of age or older to withdraw some of the equity in their home. The HECM is a safe plan that can give older Americans greater financial security. Many seniors use it to supplement Social Security, meet unexpected medical expenses, make home improvements or purchase a home with NO monthly payment.
How does a Reverse Mortgage Work?
Basically, the equity that you built up over years of making mortgage payments can be paid to you. However, unlike a traditional home equity loan or second mortgage, HECM borrowers do not have to repay the HECM loan until the borrowers no longer use the home as their principal residence or fail to meet the obligations of the mortgage. You can also use a HECM to purchase a primary residence if you are able to use cash on hand to pay the difference between the HECM proceeds and the sales price plus closing costs for the property you are purchasing. This usually requires a 35 to 40% down payment but the senior will not have a monthly pinciple and interest payment and will not be tying up as much liquid cash as when they purchase a home for all cash.
