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Myths & Realities of HECM Loans

As with many financial products, Home Equity Conversion Mortgage (HECM)
loans can be complicated and there are a number of misconceptions about how

the product works. Do you know the myths vs. the realities?

MYTH MYTH MYTH
NO.1 NO.2 NO.3

The lender owns the home. The borrower is restricted on how to Once loan proceeds are received,
use the loan proceeds. you pay taxes on them.

FACT Like all mortgage loans, the HECM FACT The proceeds from a HECM loan FACT Like any loan, HECM proceeds
loan is secured by a lien and you will not can be used for almost any purpose. Many are paid out tax-free as they are not
lose your home as long as you continue to borrowers use them to supplement their considered income. However, it is
meet the loan obligations. You cannot lose retirement income, delay receiving social recommended that you consult your
your home under normal circumstances security benefits, pay off high-interest financial advisor in connection with your
and so long as you pay your taxes and credit cards, pay for medical expenses, reverse mortgage loan application.
insurance and otherwise comply with the remodel their home, or help their adult
loan terms. children. Prudence along with budgeting
should be the proper approach to
enjoying proceeds received from your
HECM loan.

MYTH MYTH
NO.4 NO.5

The home must be free and clear of Only people with financial
any existing mortgages. hardships need HECM loans.
Call today for additional
FACT Actually, many borrowers use FACT The perception that HECM
the HECM loan to pay off an existing loans are only for “financially strapped” information.
mortgage and eliminate monthly borrowers is changing —affluent senior

mortgage payments. Paying off the borrowers with multi-million dollar homes
existing mortgage and any other liens and healthy retirement assets are using
is required as part of the loan. It is the HECMs as part of their financial and estate
borrower’s responsibility to continue planning, and are working closely in
to pay for property taxes, homeowners conjunction with financial professionals
insurance and home maintenance. and estate attorneys to enhance their
overall quality and enjoyment of life.
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