HECM – What is it?

HECM – What is it?

You have read this term and now you are needing to know . . . What IS this term HECM?  HECM is an acronym.  An acronym is a word formed from the initial letter or letters of each of the successive parts of a compound term.  Ok.  There is the dictionary definition.  Now, what IS this term HECM?

HECM is the acronym for a Home Equity Conversion Mortgage or Reverse Mortgage.  A Reverse Mortgage enables you as the borrower to access a portion of the equity in your home for your use.  It is an equity conversion that benefits the Senior. The key to the transaction is that there must be adequate equity in the property to enable a Reverse Mortgage ratios to work. The HECM or Reverse Mortgage enables you to take the inaccessible equity presently in your home and access it through the loan transaction and use it any way you desire or need.

The lender will charge an origination fee, FHA will charge a mortgage insurance premium and there are closing costs and in some cases servicing fees for the Reverse Mortgage.  All of these fees become part of the balance of the loan provided by the lender.  The balance of the Reverse Mortgage loan grows over time and there is interest charged by the lender which is added to the loan balance.

The borrower retains title to the property that is being used as the subject of the reverse mortgage until the property is sold.  The borrower is responsible for paying all property taxes, homeowner insurance, any related home assessments and for maintaining the home.  These loans are non-recourse and the borrower has no personal liability for payment of the loan debt.  The lender will, however, enforce the debt through sale of the property if the borrower fails to pay property taxes and insurance on the property.  The non-payment of taxes and assessments voids the non-recourse clause of the note.

Interest on a reverse mortgage is not deductible for purposes of personal income tax filing.  Interest earned on a growth line of credit is taxable income.  The proceeds of the home equity received through a reverse mortgage are considered taxable income.

Make sense?  Need more information?  Call me right now so we can discuss your specific questions.  Covenant Reverse Mortgage is the BEST ANSWER for you!

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Covenant Reverse Mortgage, LLC
211 E Logan Street
Caldwell, ID 83605
This material is not from HUD or FHA and has not been approved by HUD or a government agency.
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When the loan is due and payable, some or all of the equity in the property that is the subject of the reverse mortgage no longer belongs to borrowers, who may need to sell the home or otherwise repay the loan with interest from other proceeds. The lender may charge an origination fee, mortgage insurance premium, closing costs and servicing fees (added to the balance of the loan). The balance of the loan grows over time and the lender charges interest on the balance. Borrowers are responsible for paying property taxes, homeowner’s insurance, maintenance, and related taxes (which may be substantial). We do not establish an escrow account for disbursements of these payments. A set-aside account can be set up to pay taxes and insurance and may be required in some cases. Borrowers must occupy home as their primary residence and pay for ongoing maintenance; otherwise the loan becomes due and payable. The loan also becomes due and payable (and the property may be subject to a tax lien, other encumbrance, or foreclosure) when the last borrower, or eligible non-borrowing surviving spouse, dies, sells the home, permanently moves out, defaults on taxes, insurance payments, or maintenance, or does not otherwise comply with the loan terms. Interest is not tax-deductible until the loan is partially or fully repaid.