FHA Home Equity Conversion Mortgage Basics
Wise Reverse Mortgages Can Be the Saving Grace of Unprepared Retirees
Origins of the FHA HECM
Introduced in 1989, the FHA Home Equity Conversion Mortgage (often known as the FHA reverse mortgage) was a collaboration between FHA and Fannie Mae. Their goal was to empower seniors to tap into their home equity without the obligation of monthly mortgage payments. It's crucial to note that homeowners are still responsible for taxes, insurance, association fees, property charges, and maintaining their homes. Any lapses can lead to foreclosure. As the program was being structured, AARP played a vital role in ensuring senior needs were catered for.
Key Features of the FHA HECM
- Age Requirement: Borrowers must be 62 years or older.
- Tax-Free Funds: The funds acquired are loan proceeds and aren't taxable.
- Versatility: These funds can be utilized for any purpose. Whether it's for settling existing mortgages, supplementing retirement income, medical expenses, or even for travel.
- Strategic Tool: The reverse mortgage is increasingly seen as a financial strategy for retirement, offering an emergency credit line, instead of accumulating credit card debt.
Points to Remember of the FHA HECM
- Regular Statements: Borrowers receive regular statements detailing their loan balance and interest.
- Accrued Interest: Unlike traditional mortgages where you repay interest, the interest on a reverse mortgage gets added to your balance, incrementally increasing it.
- Sale of Home: If the house is sold, the borrowed amount, including the interest and fees, is paid from the sale proceeds. Any leftover equity remains with the homeowner.
- Non-Recourse Loan: If the loan amount surpasses the home's value upon selling, neither the borrower nor the heirs are liable for the excess amount.
- Ownership Remains: Even with a reverse mortgage, homeowners retain the title and ownership, similar to a traditional mortgage.
How to Get Started with a FHA HECM
Now that you're acquainted with the essentials, why not use our reverse mortgage calculator to determine your borrowing eligibility? If you have questions or need assistance, we're just a call away at 866-258-0377.
Note: These materials are not endorsed by HUD, FHA, or any government agency.






