Definition
A reverse mortgage program that lets homeowners 62 and older buy a new primary residence using loan proceeds combined with a down payment, without taking on a monthly mortgage payment. Commonly used by seniors right-sizing into a home better suited to aging in place.
Related Reverse Mortgage Terms
The FHA-insured reverse mortgage program available to homeowners 62 and older. HECM loans let you convert home equity into cash, a line of credit, or monthly payments without a required monthly mortgage payment, and include federal non-recourse protection.
A loan where the borrower (or their heirs) never owes more than the home's value at the time it's sold, even if the loan balance has grown larger. All FHA-insured HECM reverse mortgages carry this protection; any shortfall is covered by FHA mortgage insurance, not the borrower's other assets.
A portion of reverse mortgage proceeds set aside by the lender to cover future property taxes and homeowner's insurance, required when FHA's mandatory financial assessment identifies a risk of the borrower falling behind on those payments. A LESA reduces the funds available to the borrower upfront.
The percentage of a home's appraised value (up to the FHA limit) that a borrower can access through a HECM reverse mortgage, based on the youngest borrower's (or eligible non-borrowing spouse's) age and current expected interest rates. Older borrowers and lower rates produce a higher PLF.
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