What is a HECM?
A HECM or home equity conversion mortgage is the correct name for the slang term “Reverse Mortgage”. FHA’s HECM is a special type of home loan that allows a homeowner to convert a portion of equity into cash. The equity built up over years of home mortgage payments can be paid to you. But unlike a traditional home equity loan or second mortgage, no repayment is required until the borrower(s) no longer use the home as their principal residence*. HUD’s reverse mortgage provides these benefits, and it is federally-insured (FHA) as well. Our team has over 20 years’ experience only handling the FHA backed HECM. Please contact Reverse Mortgage Alabama for any information you need on pros and cons, purchase a home with the HECM Reverse Mortgage, age requirements, or anything else on the federally insured home equity-based retirement solution.
How does a HECM work? A HECM is different in that it pays you. The amount you can borrow depends on your age, the current interest rate, and the appraised value of your home. Generally, the more valuable your home is, the older you are, the lower the interest, the more you can borrow. You don’t make payments, because the loan is not due if the house is your principal residence. * Like all homeowners, you still are required to pay your real estate taxes and other conventional payments like utilities, but with an FHA-insured HUD HECM, you cannot be foreclosed or forced to vacate your house because you “missed your mortgage payment. “Can the lender take my home away if I outlive the loan?
No! You do not need to repay the loan if you or one of the borrowers continues to live in the house and keeps the taxes and insurance current. You can never owe more than your home’s value. *Will I still have an estate that I can leave to my heirs? We encourage “adult children” to be a part.
When you sell your home or no longer use it for your primary residence; you or your estate will repay the cash you received from the reverse mortgage, plus interest and other fees, to the lender. The remaining equity in your home, if any, belongs to you or to your heirs. None of your other assets will be affected by HUD’s reverse mortgage loan. This debt will never be passed along to the estate or heirs. *Will I still have an estate that I can leave to my heirs? We encourage “adult children” to be a part.
Reverse Mortgage History. The origins and reverse mortgage history of shows a loan product that has evolved dramatically over the last 40 years. The first reverse mortgage loan was written in 1961 by Nelson Haynes of Deering Savings & Loan (Portland, Maine) to Nellie Young, the widow of his high school football coach helping her to stay in her home despite the loss of her husband’s income.
The need for reverse mortgages was further developed in the 1970’s with several private banks offering reverse-mortgage-style loans. These loans gave seniors money from their home but did not afford the protections of today since no FHA insurance had been put in place.
In the early 1980’s the U.S. Senate Special Committee on Aging issued a report stating the need for standardized reverse mortgage loan products. Other committees throughout the mid 80’s cited the need for FHA insurance and uniform lending practices. In late 1987 Congress passed the FHA insurance bill that would insure reverse mortgages. On February 5, 1988 President Ronald Reagan made history by signing the FHA Reverse Mortgage bill into law. In 1989 the first FHA-insured HECM was made to Marjorie Mason of Fairway, Kansas by the James B Nutter Co. This was based around the fact the FHA insured against the property not being worth enough and leaving a debt to your heirs. The actual original name is the Home Equity Conversion Mortgage Insurance Plan.
Since 1989 HECM Reverse Mortgages have grown in popularity, especially in the mid to late 1990’s. Today’s history is when Reverse Mortgages took off. They really started to grow during the housing crisis of 2007; that when the TV commercials because common. Despite economic upheaval and forward mortgage lending issues, this product has continued to grow as a government-insured loan allowing seniors to access a portion of the equity in their homes while not having to make a monthly mortgage payment. *
So, there is the history of the HECM, which thanks to several new laws and requirements over the last few years, the Reverse Mortgage is safe enough that financial planners recommend them.
The slang term ” Reverse Mortgage” does leave people with a negative perception than is either something that happened 20 years ago or usually I find it’s not true at all. Lie the government wants or buys my house. Actually all the FHA does is insure the loan.
*Borrowers must continue to pay property taxes, homeowner’s insurance and other property obligations complying with HUD’s requirements for the loan. Failure to do so may result in foreclosure. This concludes today’s history lesson.
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