Home equity conversion mortgage (HECM) is a Federal Housing Administration (FHA) reverse mortgage program. If you are looking for supplemental funds during your retirement, you may benefit from the FHA's home equity conversion mortgage. The FHA HECM is a popular reverse mortgage option for retirees who want more cash flow.
What is a reverse mortgage?
A reverse mortgage is a type of loan that is intended for people who are 62 years or older. The home equity conversion mortgage, allows you to not have monthly mortgage repayments. You instead can receive the equity of your home as monthly cash disbursement payments. The loan is repaid after the borrower permanently moves out of the home, stops using the property as the principal residence, sells the home or the last surviving borrower dies. The loan also becomes due if you stop paying your property charges, such as taxes, homeowners’ insurance, or fail to maintain the property in good repair.
Who can benefit from a FHA HECM?
There are requirements to be eligible for a Federal Housing Administration's home equity conversion mortgage and you should be sure that a reverse mortgage is necessary for your situation. You may benefit from a reverse mortgage if you:
- Need recurring cash payments
- Do not plan to move to a new home
- Live in a single-family home or a FHA-approved condominium
What costs and benefits are associated with the FHA HECM?
There are costs that you should consider before applying for a FHA HECM. However, these costs are comparable to other options that allow you to transform equity into income. You may be required to pay closings cost, including an origination fee for your reverse mortgage. The Federal Housing Administration has a cap for the origination fees.
You will also pay a fee for FHA mortgage insurance. This is a necessary expense that will insure that you continue receiving your disbursement payments per the mortgage. Since you are using the equity of your home as income, there is a chance that your home may not have enough value to pay off the accrued interest when it is sold. This is not a problem; the FHA mortgage insurance will pay off any remaining interest costs so long as the mortgage obligations have been met.
You should also consider the servicing fees and third-party costs when you are researching FHA HECM options.
Is FHA's reverse mortgage a fixed-rate or adjustable-rate loan?
The FHA HECM can be a fixed-rate or adjustable-rate loan based on the disbursement option chosen, so you can customize your loan terms based on your expectations. The fixed-rate loan can be a good option if you expect inflation and the adjustable-rate loan adjusts up or down over time. The fixed-rate loan is only available for the lump sum disbursement option. You should consider both of these options when you meet with your Quontic Bank loan officer and discuss disbursement options.
The FHA HECM can provide you with supplemental finances by converting your home's equity into money.
Contact Quontic Bank to learn more about a FHA HECM loan
For more information about FHA HECM loan options, please contact Quontic Bank at 1-800-388-7689 today.
Quontic Bank is a Member FDIC bank, regulated by the U.S. Office of the Comptroller of the Currency. We are authorized by the U.S. Department of Housing and Urban Development (HUD) to make Federal Housing Authority (FHA)-insured mortgage loans in all fifty states. We have an A+ rating from the Better Business Bureau and were named to the Top 200 Healthiest Banks In America in 2016, ranking No. 88 of the 6,199 federally insured banks in the U.S., according to DepositAccounts.com. We were also ranked the 12th largest reverse mortgage lender in the U.S. by "Reverse Mortgage Daily” in September 2017. Quontic Bank is a member of the National Reverse Mortgage Lenders Association (NRMLA) and holds NMLS ID 403503.