5 Nevers with a Home Equity Conversion Mortgage
In an attempt to dispel misunderstandings regarding Home Equity Conversion Mortgages (HECMs), we in the industry have coined what are called the “5 Nevers”. They are:
Never Give up Title to the Home
Home Equity Conversion Mortgages are just that – a mortgage and just like a conventional loan the borrower retains title to the property.
Never Owe More Than the Home is Worth
HECMs are insured by the FHA so the borrower is never “underwater” when it’s time to repay the loan. Any amount due that exceeds the value of the home will be paid to the Lender from this insurance.
Never Have to Move
The mortgage balance becomes due when the home is no longer the primary residence or the last borrower or qualified non-borrowing spouse sells the home, is deceased or when property obligations are not met.
Never Have to Make Monthly Mortgage Payments
No monthly mortgage payments are required but the Borrower is still responsible for paying Real Estate Taxes, Homeowner’s Insurance, HOA/Condo Fees and maintaining the property.
Never Pay Taxes on Loan Proceeds
Loan proceeds are from housing equity and are therefore are not taxed. This is not to be construed as tax advice – consult your tax professional.