Reverse Mortgage

Home Equity Conversion Mortgage [HECM]

A reverse mortgage, also known as the home equity conversion mortgage (HECM), is a financial product for homeowners 62 or older who have accumulated home equity and want to use this to supplement retirement income.

All homeowners’ are required to attend counseling with a HUD approved counseling agency.
Call 215 348-8003 to set up an appointment

Eligibility Requirements for Homeowners:

  • All owners must be 62 years of age or older
  • Must occupy home as principal residence [must live in home for over 6 months per year]
  • Must own the home
    • HECM must be first mortgage lien
    • Any existing mortgages must be paid off at closing or be subordinated to the HECM

Eligible Properties:

  • Single Family, 1 to 4 unit, owner occupied dwelling which must meet FHA minimum property standards
    • Condos must be FHA approved
    • Manufactured homes are eligible if they meet FHA standards [borrower must own the land, the home must be permanently affixed to a foundation and it must have been built after 6/15/76].
  • Mobile Homes NOT eligible
  • Cooperatives NOT eligible

Basic Features:

  • Borrower retains title to the home and is responsible for taxes, insurance and upkeep.  The borrower’s estate must pay off the loan upon the borrower’s death.
  • Amount of the loan depends on value of the home, age of the borrower and loan costs [fees, interest rates, etc]
  • Loan fees can usually be “financed” – added to the loan balance at closing so borrower does not have to pay out of pocket
  • Loan balance rises over time – Rising Debt /Falling Equity loans vs. Falling Debt/Rising Equity standard mortgage
  • NO repayment required for as long as borrower lives in and maintains the home and keeps taxes and insurance current.
    • Loan becomes due and payable when last surviving borrower dies, sells home or permanently moves away
  • Have a non-recourse feature
    • total amount owed by borrower can never exceed the value of the home at the time it becomes due and payable even if loan balance grows to be greater than the home’s future value
  • Mortgage Insurance is required – upfront premium at closing + ongoing monthly premium

Payment Options:

  • Tenure Plan:  Borrower receives a monthly payment from lender for as long as home is occupied as principal residence
  • Term Plan:  Borrower receives monthly payment from lender for set period of months selected by borrower
  • Line of Credit:  Borrowers can draw up to a maximum amount at times and in amounts they choose
  • Modified Term:  Borrower may combine a line of credit with monthly payments for fixed # of months
  • Modified Tenure:  Borrower may combine a line of credit with monthly payments for as long as one borrower lives in home

Interest Rates:

  • Most HECM loans are structured as adjustable rate loans – either annually or monthly – chosen by borrower
  • Fixed rate loans may be available from some lenders but only with stipulation that proceeds taken in lump sum at closing

Other Options include HECM for Home Purchase and HECM Refinance loans.

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