HECM Reverse Mortgages Defined

hecm reverse mortgageEver since the economy careened off the proverbial cliff at the end of 2007 and we began slogging our way through the ever persistent Great Recession, FHA insured reverse mortgages are virtually the ONLY kind of reverse mortgage still available in the market place today.

The majority of the alternative products that existed before 2008 are no longer available. Those loans used to be referred to as proprietary loans or sometimes, single purpose reverse mortgages.

FHA insured reverse mortgages are called Home Equity Conversion Mortgages, and use the achronym HECM, (pronounced heckum.)

What many people don’t realize however, is that there are several “types” of FHA insured HECM reverse mortgages, even though they all go by the name HECM.

The various HECM Reverse Mortgages

HECM Standard – This is the loan that was the “original” FHA insured reverse mortgage. This is the option that in most cases will give you the highest amount of money, but it also has the highest associated costs.

HECM Saver – This reverse mortgage offers a lower loan amount maximum (usually about 18 to 20% less than the Standard HECM,) but it has dramatically lower associated costs. This is a great option for folks that don’t need the maximum amount of money they are eligible for under the Standard HECM, but still want the benefit of accessing home equity without having to qualify for a mortgage that requires monthly repayments.

HECM For Purchase – This reverse mortgage allows folks to use a reverse mortgage to purchase a home. This is ideal for people that want to relocate during retirement, downsize to a more age friendly home, or simply want a change of residence. Before the HECM for Purchase was available, people that wanted to buy a different home for retirement, first had to either pay all cash for the new home or get a traditional “forward” mortgage. Then they had to turn around and apply for a reverse mortgage, which essentially required paying closing costs twice to accomplish what can now be done in one simple transaction using the HECM for Purchase.

Subsets of the above HECM Reverse Mortgages Types

Within the HECM Reverse Mortgage products mentioned above you also have a subset of additional variations. Those variations are:

Fixed Rate HECM Standard and Saver

Variable Rate HECM Standard and Saver

Without question, a reverse mortgage is a bit more complex than other mortgage products you may be familiar with. Your decision about whether to use one as part of your overall retirement planning strategy is highly personal and should be considered thoroughly before you decide.

Gathering complete information, studying the material, getting your HUD approved counseling are all essential first steps to take in advance of making your final decision about whether a HECM reverse mortgage is right for you.

If you’re interested in getting information about your qualifications so you can evaluate whether this is a prudent plan for you, feel free to contact us below.

Free Reverse Mortgage Quote