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Home Equity Conversion
Mortgage Loan Basics
Information for Financial Advisors and CPAs
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? Receiving the Money
A HECM enables homeowners 62 and older to access Borrowers can receive HECM loan proceeds in several ways:
1
their home’s equity as tax free loan proceeds while A single lump sum
eliminating their monthly mortgage payments. Monthly payments
Borrower must continue to pay property taxes and
insurance. Line of credit
A combination of the above
Maintaining Ownership
Borrowers retain ownership of their home but are Advantages of a Home Equity Loan
subject to a lien granted to the lender. They are Unlike a HELOC loan, a HECM loan does not require
responsible for paying property taxes, homeowners monthly mortgage payments. 2
insurance, and the home maintenance, and otherwise
complying with the loan terms. The borrowers may FEATURE HECM HELOC
continue to live in the home and the loan doesn’t have Monthly Mortgage Payment O NO P YES
to be repaid until they leave, sell the home, or fail to
2
meet loan obligations. Minimum FICO Score O NO P YES
Line of Credit Growth 3 P YES O NO
Monthly Payments *Clients must be able to prove they are willing and able to pay their
,2
Borrowers make no monthly mortgage payments property taxes, homeowners insurance, and conduct general home
maintenance.**This line of credit also includes a compounding feature so
unlike traditional mortgages, with a HECM loan, the that available credit increases each period on the prior period’s available
lender pays the borrower. Borrower must continue to credit balance.
pay property taxes and insurance.
Use of the Money
Common uses of the proceeds include paying for monthly
Loan Amount living expenses, medical bills, home repairs and more. The
The amount of the loan depends on: age of the HECM loan can also be used prior to portfolio withdrawals,
youngest borrower or eligible non-borrowing spouse, after investable assets are depleted, or as coordinated
current interest rates, appraised value of the home and strategy based on portfolio returns.
amount of equity in the home.
Government Benefits
Funds from a HECM loan generally do not affect regular
Social Security or Medicare benefits, however, need-based
benefits such as Medicaid and Supplemental Security
Income (SSI), could be affected.
For industry professionals only - not intended for distribution to the general public. AAG026