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Home Equity Conversion
Mortgage Loan Basics
Information for Financial Professionals
Learn more about how Home Equity Conversion Mortgage (HECM) loans
can offer an intelligent, tax-efficient solution for homeowners 62 and over.
Tom Selleck, AAG Paid Spokesperson
What is a HECM? Advantages of a Home Equity Loan
A HECM loan enables homeowners 62 and older to access Unlike a HELOC loan, a HECM loan does not require
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their home’s equity as tax-free loan proceeds while monthly mortgage payments .
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eliminating their monthly mortgage payments .
FEATURE HECM HELOC
2 Borrower must continue to pay property taxes, homeowner’s
insurance, and maintain the home. Monthly Mortgage Payment O NO P YES
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Minimum FICO Score O NO P YES
Maintaining Ownership Line of Credit Growth 3 P YES O NO
Borrowers retain ownership of their home but are subject
to a lien granted to the lender. They are responsible for
paying property taxes, homeowner’s insurance, home Use of the Money
maintenance costs, and otherwise complying with the loan Common uses of the proceeds include paying for
terms. The loan doesn’t have to be repaid until they leave, monthly living expenses, medical bills, home repairs and
sell the home, or fail to meet loan obligations.
more. The HECM loan can also be used prior to portfolio
withdrawals, after investable assets are depleted, or as a
Monthly Payments coordinated strategy based on portfolio returns.
Borrowers make no monthly mortgage payments , unlike
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traditional mortgages. Government Benefits
Funds from a HECM loan generally do not affect regular
Loan Amount Social Security or Medicare benefits, however, need-
based benefits such as Medicaid and Supplemental
The amount of the loan depends on four factors: Security Income (SSI) could be affected.
Age of the youngest borrower or eligible non-
borrowing spouse
Receiving the Money
Current interest rates
Borrowers can receive HECM loan proceeds in several
Appraised value of the home ways:
Amount of equity in the home A single lump sum
Monthly payments
Line of credit
A combination of the above
For industry professionals only - not intended for distribution to the general public. AAG026