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Home Equity Conversion Mortgage (HECM)

Loan information on Home Equity Conversion Mortgage (HECM)

Q: Will I have to pay any fees to obtain a HECM?

A: Yes, you will have to pay an origination fee, other closing costs, and a mortgage insurance premium, which is divided into two parts: an up front premium of 2 percent of the Maximum Claim Amount, and an annual, ongoing fee of 1/2 percent on your mortgage balance. You are able to finance the origination fee, other closing costs, and the up front 2 percent mortgage insurance premium - that is, these items may be included in your loan balance so that you do not have to pay for them in cash. In addition to the yearly insurance premium, a servicing fee is charged to your loan balance each month. The servicer charges this fee to administer your loan. HECMs are different from many loans in that some of the fees are charged up front rather than added to the interest rate.

Q: Can I be forced to sell or vacate my home if the money I owe on the loan exceeds the value of my home?

A: No, not as long as you continue to occupy the property as a principal residence and continue to make timely homeowner's insurance and property tax payments. You cannot be forced to sell or vacate the property, even if your loan balance, the total of the mortgage payments to you plus interest and mortgage insurance premiums over the life of the loan, exceeds the value of the property. FHA insurance covers any further financial obligation to the lender.

Q: Will my heirs owe anything to the mortgage lender if I die?

A: Upon your death, the loan balance, consisting of payments made to you or on your behalf plus accrued interest, becomes due and payable. Your heirs may repay the loan balance by selling the home or by paying off the HECM loan so that they may keep the home. If the loan balance exceeds the value of your property, your heirs will owe no more than the value of the property. FHA insurance will cover any balance due the lender. No additional financial claims may be made against your heirs or estate.

Q: If my home appreciates in value during the mortgage term, who will be entitled to that money?

A: With a HECM you are legally required to pay back to the lender only the outstanding balance. Any money remaining after the mortgage is paid goes to you or, upon your death, to your heirs.

Source: Fannie Mae HECM Consumer Fact Sheet

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