You may have heard about mortgage, but ‘reverse mortgage’ or ‘home equity conversion mortgage’ (HECM) might be a novel term for you. Let us explain you the mechanics of HECM loan or reverse mortgage in detail but first let us start by explaining you about the traditional mortgage.
A traditional mortgage is an instrument that is sold to home buyers by the financial institutions in the US. Under this instrument, the home is property of the bank, and the mortgagor makes regular monthly payments. If the borrower fails to honor its financial obligations, then the bank can foreclose the house and sell it to other interested home buyers.
On the other hand, an HECM loan is extended to borrowers that own their house but want to take a loan against it. HECM loans are designed for retired old people so that they can lead the end days of their life without any financial worry. By obtaining an HECM loan, they get monthly payments so that they can make their ends meet. The money extended by the lender is the loan that has to be repaid, but the borrower does not have to worry about it.
After the death of the borrower of the loan, the house will be confiscated by the bank and sold to recover the amount that has been lent to the borrower. This is because the house was the collateral and the lender had the 1st charge on it. If the amount at which the bank has liquidated the property is greater than the amount that the bank owes, then the excess money will be distributed equally among the heirs of the deceased borrower.
Longbridge financial is a lending company that specializes in HECM loans and is approved by the Federal Housing Administration (FHA). It operates in 46 states and is committed to providing financial peace of mind to the elder generation.
