If you are 62 or older and you own your home in Michigan, a HECM may let you eliminate your monthly mortgage payment. Here is how it actually works, including the parts most ads leave out.
The real name is a Home Equity Conversion Mortgage. Everybody shortens it to HECM.
It is a loan insured by the Federal Housing Administration, available to homeowners 62 or older on the home they live in. It lets you convert part of your equity into cash, a line of credit, monthly advances, or simply into the elimination of the mortgage payment you already have.
You keep the title. You are not selling your home, you are not signing it over to a bank, and you are not signing it over to the government. It is a mortgage, same as the one you have now. The difference is which direction the balance moves.
On a regular mortgage you pay every month and the balance goes down. On this one there is no required monthly principal and interest payment, and the balance grows over time instead. That is the trade, and that is the whole thing in one sentence.
It is also non-recourse. Neither you nor your heirs will ever owe more than the home is appraised for when the loan is repaid, even if the balance has grown past the value.
You are retired or close to it, and there is still a balance on the house. Removing that monthly payment changes your budget more than almost anything else available to you.
You do not need cash today. You want a line available if something happens. With a HECM, the unused portion of the line grows over time rather than sitting flat.
Downsizing to a ranch or a condo. HECM for Purchase lets you buy the next house with a down payment plus loan proceeds, and no monthly principal and interest payment.
No monthly payment does not mean no obligations. These are real requirements, and falling behind on any of them is a default that can lead to foreclosure. Anyone who does not walk you through this list is not being straight with you.
The loan becomes due when the last borrower sells, permanently moves out, or passes away. At that point it can be repaid from the sale, from a refinance, or from other funds if your heirs want to keep the house.
Nobody else in reverse mortgage advertising will tell you this, which is exactly why it is here.
Planning to move in the next two or three years? Do not. The upfront costs do not have time to make sense.
If leaving the house to your kids free and clear is the single most important thing to you, and you have other ways to get by, this is not your move.
The existing payoff comes out first. If there is not enough equity underneath it, the loan does not work. That is the most common reason I tell somebody no.
Not the payments, the house. Maintenance is a requirement of the loan, and this does not fix that.
Before anyone can take your application, you are required to complete a counseling session with a HUD-approved counselor. That counselor is independent. They are not paid by me, they do not work for my company, and they have no stake in whether you move forward.
Some loan officers treat this as a hurdle to get past. I think it is the best part of the program. If a reverse mortgage is wrong for your situation, an independent third party will tell you so before you have spent anything meaningful, and you should listen to them. If somebody is trying to rush you past it, that tells you everything.
A lot of the people who call me are not the borrower. They are the son or daughter doing the research, trying to figure out whether this is legitimate.
That is a reasonable call to make and I am happy to have it. I will explain what the loan does, what it costs, what happens to the house afterward, and what the alternatives are, including the times when the answer is that a reverse mortgage is not the right move.
You do not need your parent on the phone for the first conversation.
One conversation. I will tell you plainly whether this is a good idea for your situation, and if it is not, I will tell you that too.
We'll figure it out.
Call (810) 819-8686Or book a call if a time works better than a phone tag.
About Home Equity Conversion Mortgages. A HECM is a loan insured by the Federal Housing Administration. This page is not from HUD or FHA and has not been reviewed or approved by HUD, FHA, or any government agency, and the product described is not sponsored or endorsed by any government agency. Borrowers must be 62 or older, must continue to pay property taxes, homeowners insurance and any applicable HOA dues, must maintain the property, and must occupy it as their primary residence. Failure to meet these obligations may result in the loan becoming due and payable. The loan balance grows over time and home equity decreases. Completion of a counseling session with a HUD-approved counselor is required before application. Loan proceeds are not income, and nothing on this page is tax advice; consult a qualified tax professional about your situation. Amounts available depend on the age of the youngest borrower, expected interest rates, and appraised value. McKenney Home Lending, LLC is a licensed mortgage broker and brokers loans to wholesale lending partners; it is not a lender.
