Shopping for a Home Equity Line of Credit or Home Equity Loan? If you are 62 or older, consider this...

A Home Equity Conversion Mortgage (HECM) — also known as a Reverse Mortgage — offers a line of credit option with many of the benefits of a traditional Home Equity Line of Credit (HELOC), plus some significant advantages.

  • Converts home equity into funds you can access as needed
  • Federal Housing Administration (FHA) insured
  • Flexible payment feature — Giving you freedom and flexibility in how you manage your monthly expenses
    • No required monthly payment on principal and interest required. As with any home-secured loan, you remain responsible for property taxes, homeowners insurance, and property maintenance in order for the loan to remain in good standing.
    • You can pay down your principal and interest if and when you choose, no pre-payment penalties apply.
  • The unused line of credit grows over time, giving you more available funds. This means that the less you take out up front, the more you’ll be able to borrow later.
  • Lender cannot cancel or reduce your line of credit, as long as you meet your loan obligations.
  • No pre-defined loan maturity date: Loan remains in force and no principal and interest payments are required until borrowers move, pass away or sell the home, as long as they meet their loan obligations.
  • You can opt to convert the line of credit into a monthly stream of funds at any time in the future, if you so choose
Available for Homeowners 62+
Find out how much you qualify for:
Quick Links

Compare a Reverse Mortgage versus a Home Equity Line of Credit (HELOC)

The Reverse Mortgage process

How the line of credit grows

Compare a HECM Reverse Mortgage versus a traditional Home Equity Line of Credit.

The advantages of a Reverse Mortgage Line of Credit are clear.

  Advantage Our Reverse Mortgage Line of Credit Traditional HELOC  
  Converts home equity into funds you can easily access as needed. check check  
  Federal Housing Administration (FHA) insured loan check    
  No required monthly payment on principal and interest.
  • (As with any home-secured loan, you remain responsible for property taxes, homeowners insurance, and property maintenance in order for the loan to remain in good standing.)
  • Flexible payment feature: You can choose to pay down your loan at any time if you so choose, or defer repayment. The benefit of a HECM Reverse Mortgage Line of Credit is that you are not mandated to make principal and interest payments each month. This gives you freedom and flexibility in terms of how you manage your monthly expenses.
check    
  The unused line of credit grows over time, giving you more available funds.
  • This means that the less you take out up front, the more you’ll be able to borrow later.
check    
  Lender cannot cancel or reduce your line of credit, as long as you meet your loan obligations. check    
  You can never owe more than the home is worth when the loan is repaid — known as the non-recourse feature. check    
  No pre-defined loan maturity date: Loan remains in force and no principal and interest payments are required until borrowers move, pass away or sell the home, as long as they meet their loan obligations. check    
  You can choose to convert the line of credit into a monthly stream of funds at any time in the future. check    

The Loan Process: A Reverse Mortgage Roadmap

A Home Equity Conversion Mortgage (HECM) — commonly known as a reverse mortgage — is a powerful financial tool that allows you to turn some of the equity in your home into funds you can use as you choose.

The process to obtain a reverse mortgage is simple; but it’s helpful to know what you can expect. Your licensed Reverse Mortgage Funding LLC (RMF) loan specialist will guide you throughout the entire process, and will answer any question you may have along the way.

You can use this as a checklist as you complete each step.

STEP ONE: Preparation

  • Education. Your RMF loan specialist will have all the information you’ll need to help you decide if a reverse mortgage is the right solution for you.

STEP TWO: On the Road

  • Application. After counseling, if you’ve decided to move forward you’ll choose a lender and submit your application to them. The application includes some personal information, and a financial assessment will be conducted to make sure you’ll be able to afford ongoing expenses like property taxes and insurance and home maintenance.
  • Counseling. You’ll meet with a third-party reverse mortgage counselor who’s approved by the U.S. Department of Housing and Urban Development (HUD), to make sure you understand all aspects of the loan.

STEP THREE: Rounding the Bend

  • Loan Processing & Underwriting. Your home will be appraised, by an independent appraiser, to determine the value. Then the appraisal and loan package will be sent to an RMF underwriter for review and approval. The underwriter will make sure all the information in the package is correct and compliant with all laws and regulations.

STEP FOUR: Almost There

  • Signing Closing Documents. After your loan application is approved, you will sign your closing documents with a title officer or attorney (depending on your state’s requirements).

STEP FIVE: Arrival!

  • Funding and Disbursement. Three days after closing, the loan funds are disbursed and you can access them according to the payment plan you selected. Your loan funds will first be used to pay off any existing mortgage on your home, a new lien (the reverse mortgage) is placed on the home, and you can use the remaining funds from your reverse mortgage however you choose.
Reverse Mortgage Roadmap

How the Reverse Mortgage Line of Credit GROWS...

The unused portion of a Reverse Mortgage Line of Credit grows at a rate of 1.25 percent plus the current interest rate of the loan — independent of home value — as the chart below* shows. So as you age, you can gain access to significantly more funds. The earlier you establish the Reverse Mortgage Line of Credit and the less you take out up front, the more funds you’ll have in the future.

HELOC Graph

*  The information being shown is for illustrative purposes only. Scenario is a 62-year-old couple, with a home valued at $450,000 and no mortgage, securing a reverse mortgage line of credit (LOC). LOC will grow at 4.50% above the 1-year LIBOR (margin = 3.25% + ongoing Mortgage Insurance Premium of 1.25% = 4.50%). The initial LOC is $212,751; left unused, in 10 years, when they are 72 years old, LOC will have grown to $368,949 in available funds. In 20 years, at age 82, assuming no withdrawals the amount available will be $639,824. The estimates shown are based on a CA property and Reverse Mortgage Funding LLC’s HECM Annual ARM as of 12/08/15. The initial APR is 4.268%. The loan has a variable rate. The rate is tied to the 1-year LIBOR plus a margin of 3.25%. There is a 5% lifetime interest cap. This means that the maximum rate that could be imposed is 9.268%. In this example, closing costs include an origination fee of $0, third-party closings costs of $2,437.45, and an up-front FHA Mortgage Insurance Premium of $2,250 depending on the appraised value of the property securing the loan. The borrower receives a credit at closing of $3,688.45. Interest rates and funds available may change daily without notice.

L284-Exp112016