Below, you’ll find a helpful summary of the main advantages and requirements of a Home Equity Conversion Mortgage (HECM) to help you get started.

Who can get a HECM?To qualify, you must:Be age 62 or olderLive in your homeOwn your home

• Houses and most condos qualify• Homes with existing mortgages may also qualify

Your home must be your principal residence, and meet U.S. Department of Housing and Urban Development (HUD) minimum property standards.

If you do not currently own a home, there’s even a HECM for Purchase for which you may still qualify to help you buy a home. For details, see page 11.

What exactly is a HECM?A HECM, or Home Equity Conversion Mortgage, is an important financial option that allows you to tap into the equity you’ve already built in your home. It provides cash to help pay for the things you need or want—while you remain in, and retain ownership of, your home. Best of all, unlike conventional mortgage or home equity loans, there are no monthly mortgage payments.

If you have an existing first or second mortgage on your home, don’t be discouraged. In fact, many homeowners use a HECM as a way to continue owning their home—and to eliminate their monthly mortgage payment in order to free up that cash flow.

HECM:An Overview

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What are the requirements?While the loan is in force, you do not need to make monthly mortgage payments. Your responsibilities are to pay property taxes and homeowners insurance, and keep the home in good repair. And you can use your HECM proceeds to cover these routine expenses.

How is the loan repaid?Typically, the loan (along with any accrued interest and other fees) is repaid with funds received from the sale of the home, and you or your heirs retain any remaining money. If you or your heirs want to keep the property, you can also choose to repay the loan at any time using a conventional mortgage or other assets. Because a HECM is a home-secured debt, you or your heirs would be required to repay the loan balance in order to do so.

When must the loan be repaid?The loan must be repaid when the borrowers pass away, sell the property, or no longer live in the home as a primary residence for longer than 12 months. The loan also becomes due if the borrowers fail to comply with the terms of the loan—which include continuing to pay property taxes and homeowners insurance, and maintaining the property in good repair.

How can I use the money?Proceeds from a HECM loan can be used in a variety of ways, from covering monthly living expenses to fulfilling lifelong dreams. You can choose to get the money as a lump sum, monthly income, line of credit, or a combination of these. It’s tax-free, and generally doesn’t affect Social Security or Medicare benefits. However, needs-based benefits—such as Medicaid and Supplemental Security Income (SSI)—may be affected. Contact a tax professional or benefits specialist for information about your particular situation.Proceeds from a HECM are generally not considered taxable income. This is not intended to be tax advice; please consult a tax advisor. Your home must be your principal residence, and meet U.S. Department of Housing and Urban Development standards. We can help you determine if a HECM is right for you, and if your home qualifies.

Supplement Your Retirement IncomeMany older adults are on a fixed income, but that doesn’t stop the cost of living from continuing to rise. A HECM can help you deal with monthly expenses, as well as provide an opportunity to lower or eliminate credit card or other debt.

Pay Off Your Existing MortgageA HECM is a home-secured loan with one key advantage: it can eliminate your monthly mortgage payment. If you’re still making monthly payments on a conventional mortgage, you may have less disposable income than you want or need at the end of each month. Your HECM pays off your existing mortgage, so you can free up that money for other things.

Manage the UnexpectedLife is unpredictable—cars break down, homes need repairs, and family members may need extra help. With a HECM, you’ll have a source of cash to help you deal with these and other unplanned expenses.

Home Equity Conversion Mortgage (HECM)Common Uses for a

HECM EXAMPLE 1:

Meet Dan and Ginny, retired homeowners who want to reduce their monthly household costs, and create a rainy-day cash reserve to prepare for unexpected expenses.* Dan is 77 years old, and Ginny is 75.

Their home’s value is appraised at $350,000, with a mortgage balance of $175,000 remaining and a monthly mortgage payment of $1,309. If Dan and Ginny use a Home Equity Conversion Mortgage to pay off their mortgage, they can eliminate the burden of their monthly payment, and free up that $1,309 of extra cash every month—leaving them with a rainy-day fund of $13,297 that they can use at any time to take care of unexpected needs.

*Assumptions: Home value = $350,000 • Age of homeowner = 75 • Interest rate = 2.277% APR • Adjustable interest rate–tied to one-month LIBOR with a margin of 2.125% APR • Existing mortgage amount = $175,000 • Origination fee = $5,500 • Initial Mortgage Insurance Premium (MIP) = $8,750 • Third-party closing costs = $3,603 • Line of credit (after payoff of mandatory obligations) = $13,297 • Existing mortgage payment (principal and interest only) = $1,309 (Assumption: the borrower’s prior mortgage was a 15-year mortgage at 3.75% APR for $180,000 and it has been paid down to a balance of $175,000).

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Pay for Prescriptions and Health CareEven with new government programs, expenses such as prescription medicine, home health care, and other out-of-pocket medical needs can take a sizable bite out of your budget. A HECM can help you fund the care you need.

Update or Renovate Your HomeIf you’re like many people, your home is your most important asset. A HECM can give you the means to make those upgrades you’ve been putting off, and help you enhance your home to match your wants and needs.

Fund a Major Purchase Is there a costly item you’ve been putting off buying because you didn’t have the cash available to fund it or make a down payment? Whether it’s something you want, or really need, the proceeds from a HECM may make it possible.

HECM EXAMPLE 2:

Frances is 71 years old. She has paid off her first mortgage on her home, but currently has a Home Equity Line of Credit (HELOC) that requires her to make monthly payments.* With a HECM, she could choose to receive set, monthly payments for as long as she lives in her home—or to set aside a line of credit to use for unexpected costs and postpone the need to draw down her investments.

The value of Frances’ home is appraised at $250,000. She has no mortgage, but does have a traditional HELOC with a balance of $35,000, with a monthly payment of $1,307. By using a HECM, she can pay off the HELOC and eliminate that monthly payment. Now she can choose to take $98,147 in a line of credit, receive monthly payments from RMF of $606.12 for as long as she lives in the home, or receive a combination of the two.

*Assumptions: Home value = $250,000 • Age of borrower = 71 • Interest rate = 2.277% APR • Adjustable interest rate–tied to one-month LIBOR with a margin of 2.125% APR • Existing mortgage amount = $35,000 • Origination fee = $4,500 • Initial Mortgage Insurance Premium (MIP) = $1,250 • Third-party closing costs = $3,603 • Line of credit = $98,147 OR monthly tenure payment = $606.12.

(Common Uses for a HECM, continued)Purchase a Home Maybe you’d like to move to a more accessible home, one that’s right-sized for your needs, or one that’s easier to maintain. Or, maybe now is the time to purchase your dream home. Even if you don’t currently own a home, there’s a HECM that can help you do just that.

In many ways, using a HECM to buy a home is similar to using a traditional mortgage—but a HECM does have some advantages. For example, the loan amount you’re eligible for and your required down payment are calculated based on the age of the youngest borrower; interest rates; and the lesser of either the home’s appraised value, purchase price, or the lending limit set by the Federal Housing Administration (FHA). After that, the appraisal, inspection, contingencies, documents, and closing processes are virtually the same as with a traditional mortgage.

As with any HECM, you’ll pay property taxes and homeowners insurance, and be responsible for the upkeep of the property, but there are no required monthly mortgage payments while you live in the home.

If this option interests you, an RMF loan specialist can provide you with more information.

What’s the difference between a HECM and a home equity loan?Both a HECM and a traditional home equity loan are home-secured loans that allow you to use the equity in your home to generate cash. But with a home equity loan, you have to make monthly payments of principal and/or interest. With a HECM, there are no monthly mortgage payments as long as you remain in the home. Your loan balance increases over time as the interest and other costs on the loan are added to the balance. The loan is repaid only after you sell or permanently leave the home.

How much money can I get?The amount that you can borrow depends on several factors, including:Your age The type of HECMCurrent interest ratesThe location and appraised value of

your homeFederal Housing Administration (FHA)

lending limits for your area

Your RMF loan specialist can help you determine which options, and how much money, may be available to you.

How do I receive the funds?You have a range of options:Lump sumMonthly payments (where you receive

a fixed amount each month)Line of credit (i.e., take funds when

you need them)A combination of the above

What if I still owe money on a first or second mortgage?You may still be eligible for a HECM, depending on the amount of your remaining mortgage versus the value of the home. The funds from the HECM would first be used to pay off any existing mortgages on the property—which, in turn, eliminates a significant monthly expense.

Will it affect my government benefits?The funds from a HECM generally do not affect regular Social Security or Medicare benefits. Your RMF loan specialist can help you assess your situation. However, needs-based benefits, such as Medicaid and Supplemental Security Income (SSI), may be affected. In this case, contact a benefits specialist for information about your situation.

Answers to Common Questions about a Home Equity Conversion Mortgage (HECM)

Are interest rates fixed or variable?Most HECMs have variable rates that are tied to a financial index and will vary according to market conditions and product. RMF offers both variable and fixed rate HECMs. In a rising interest rate market, the balance on a variable rate HECM grows more quickly than on a fixed rate HECM. See pages 5 and 6 for specific examples.

Can a HECM be refinanced? Yes, refinancing is possible. If your home increases in value, making more equity available, this may be an attractive option.

Are there other fees, in addition to the interest?Most HECMs have an origination fee, closing costs, a mortgage insurance premium, and a monthly servicing fee. These can be financed so there won't be an immediate cost to you. They are simply added to the principal and paid along with interest when the loan becomes due. See pages 5 and 6 for specific examples.

How is the loan repaid?The loan balance must be repaid, including interest and fees, typically when the last surviving borrower no longer lives in the home. This is usually done through the sale of the house, or other assets. Repaying the HECM through a conventional mortgage is another option.

When do the principal and interest become due?The HECM loan must be paid in full when one of the following occurs:All borrowers permanently move out

of the homeThe last surviving borrower passes awayThe house is soldThe borrowers fail to meet their loan

obligations, including paying their property taxes or homeowners insurance

The property deteriorates beyond what’s considered reasonable wear and tear, and the problems are not corrected

How does a HECM affect the estate that I leave to my heirs?When the loan becomes due, you or your estate must repay the lender for the cash received from the HECM, plus interest and other costs. The loan can be repaid by selling the property, refinancing, or using other assets. Any sale proceeds that are in excess of the loan balance belong to you or your heirs. If you sell your home for a fair market price that is less than the loan balance, then there would be no proceeds to keep—but the lender cannot collect more than the sale amount received by you or your estate.

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RMF offers government-insured HECM loans that adhere to Federal Housing Administration (FHA) guidelines, and include both variable and fixed rate products. Specially designed for the needs of older adult homeowners, they offer the flexibility to help you achieve your goals, plus a measure of safety and security.

Home Equity Conversion Mortgage (HECM)HECMs offer many different alternatives for interest rates, closing costs, the amount of money you can access, and how you can choose to receive the proceeds.With a HECM, you can choose how much—or how little—of the available money you want

to take.By taking less money, you can preserve more of your equity so it’s available in the future

for you or your estate.

The majority of HECMs have variable interest rates. These are tied to a published financial index, which changes with market conditions.

HECM for PurchaseThinking about moving to your dream home, or one that better fits your needs? Taking out a HECM on the new home can provide the money you need to purchase it. This applies for the purchase of a one- to four-family dwelling unit, to be occupied as your principal residence.

Here’s how it works*:You purchase the home you want using a HECM on that homeYour loan is government-insured, adding a measure of safety and securityThere are no required monthly mortgage payments, so you may be able to free up money

to pay for other thingsBest of all, you get to enjoy all of these benefits, and still own your home

Flexibilityand Security

*Certain conditions apply, such as issuance of a certificate of occupancy prior to the HECM loan closing.

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Now that you have a better understanding of HECM loans, you may be ready to take the next step. RMF can be your trusted partner throughout the HECM process, helping to make it as easy and convenient as possible.

Call RMF to speak with a loan specialistThis is an important and easy first step, with no pressure or obligation. It’s just an opportunity to get answers to your questions. Your loan specialist can meet with you in the comfort and privacy of your own home, where you can invite a friend or family member to participate in the discussion if you like.

Obtain independent HECM counselingThis service is required by the government to make sure you’ve had all your questions answered by an unbiased, independent third party. Counselors must be approved by the U.S. Department of Housing and Urban Development.

Fill out an applicationYou’ll need to provide your counseling certificate from step #2. You’ll also need to have copies or originals of key documents, such as your Social Security card and a photo ID.

Have your home appraisedThis is to determine your home’s value, and is a standard procedure for any mortgage.

Complete your closing Final paperwork is signed, and you can decide how you want to receive your funds.

A Home Equity Conversion Mortgage (HECM),step by step

Proof of Social Security Number

Birth certificate

Photo ID (e.g., driver’s license, passport, or state-issued ID)

Most recent property tax bill

Homeowners/hazard insurance policy

Death certificate for any deceased property owner whose name still appears on the title

What you need to apply:

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