The federal government insures HECM reverse mortgage. In fact, HECM or Home Equity Conversion Mortgage is the only reverse mortgage program, which is backed by the Federal government. The United States of America's Department of Housing and Urban Development has FHA as one of its arm. The FHA or the Federal Housing Administration insures the reverse mortgage loans of HECM.
Assurance from FHA or Federal Housing Administration:
When we say that the HECM reverse mortgage is insured, it means that the FHA assures the borrowers that they will receive all the payments due to them as long as the loan remains valid. Depending on the age of the borrower, valuation of the house and the prevailing rates of interest in the market, the FHA decides as to how much loan amount an individual is entitled to get.
HECM reverse mortgage borrower may retain ownership:
Another advantage of the HECM reverse mortgage is that an individual opting for home mortgage is entitled to retain the ownership of the house even while enjoying the benefits of reverse mortgage. HECM reverse mortgage is the largest selling mortgage. Approximately 90% of all reverse mortgage applications comprise this loan type. The costs pertaining to HECM reverse mortgage is also meager. The proceeds of HECM reverse mortgage may be used up for any purpose as desired by the borrower.
Eligibility criteria for availing HECM reverse mortgage and features of the loan:
Reverse mortgage loan programs are offered to individuals who have retired and are of the age 62 years and above. He should also own a house against, which the HECM reverse mortgage loan may be availed. The borrower should have been residing in the house for at least 6 months.
Features of the HECM reverse mortgage loan:
The borrower is required to repay the HECM reverse mortgage loan after the house is sold or ownership gets transferred to someone else. Even if the borrower stops residing in the premises, the loan needs to be repaid.
In the event the borrower(s) dies, the outstanding balance of the HECM reverse mortgage loan is paid by the heir of the borrower(s). This may be done by selling off the house or repaying the outstanding amount without selling the house. If the house gets sold for a price, which exceeds that of the loan amount, after the outstanding loan balance is paid, the heir takes the remaining amount.
If the price of the house is less than the loan amount, the insurance company fills the gap. There is one big advantage and that is at no point of time, the loan amount exceeds the value of the house.