Reverse mortgages backed by the Federal Housing Administration (FHA), otherwise known as home equity conversion mortgages (HECMs), account for almost all reverse mortgages in the United States, according to the National Reverse Mortgage Lenders Association. In 2021, more borrowers entered into reverse mortgages than the year before, at almost 50,000 more.
Other ways to tap into home equity, such as home equity loans, home equity lines of credit, and cash-out refinancing, were generally more popular in recent years, but things could be changing as the reverse mortgage has acquired more protections and is becoming ever more popular among retirees.
How HECMs Work
Available to homeowners with considerable home equity who are age 62 or older, HECMs let homeowners borrow against the value of their home. Unlike a forward mortgage, a reverse mortgage doesn’t require the homeowner to make any loan payments, making a reverse mortgage a financial strategy for people who find themselves short on cash in retirement. The loan is not prepaid until the borrower passes away or moves out.
Check out our Reverse Mortgage Guide to learn more about the reverse mortgage. Feel free to request hard copies if that is something you’d like for yourself or your clients.
Here at Penny Lane we are experts at reverse mortgages and would more than happy to answer any questions you may have or take a look at your situation.