The reverse mortgage market was created in 1987 with the creation of the HUD program called the Home Equity Conversion Mortgage or HECM. Targeted at seniors who had paid down or paid off their mortgage notes over the years, the HECM senior reverse mortgage program has several significant features and requirements.
- The borrowers must be 62 or older.
- The loan looks only to the property for repayment – there is no qualification based upon income, loan to value ratios or credit history.
- There are a number of flexible options for the borrowers to receive the proceeds of the loan including a lump sum, a line of credit to be used as needed, tenure payments paid while the loan is outstanding or for a fixed number of months, and several combination plans.
- The loan is not due while one of the borrowers occupies the home as their primary residence.
- There are no monthly or other payments to be made during the term of the loan. Interest and fees accrue while the loan is outstanding. The loan is due and payable when none of the original borrowers continue to use the home as their primary residence.
The senior reverse mortgage home equity conversion mortgage program can provide tax-free cash flow to seniors who may need to access the equity in their homes to provide additional funds for retirement and unlike a home equity line of credit or second mortgage, there are no payments to be made during the term of the loan. With a reverse mortgage, you continue to own your home, and you will need to continue to make payments for property taxes and homeowners insurance.