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Home Equity Conversion Mortgage

Home Equity Conversion Mortgages are designed to give you access to funds from one of your biggest investments - your home. Also known as a a reverse mortgage, a Home Equity Conversion Mortgage allows you to borrow based on the equity of your home. If you are at least 62 years old and own the home you consider your primary residence, then a Home Equity Conversion Mortgage can help you fund the next stages of your life.

What can you do with a Home Equity Conversion Mortgage? Lots of things, like:

  • Eliminate your mortgage payment
  • Improve your cash flow
  • Build an emergency fund

The benefits are:

  • Monthly payment not required (Still required to pay taxes, insurance, and maintenance costs)
  • Establish a line of credit that can grow in value over time.
  • Flexible pay out options
  • No pre-payment penalties
  • Insured by the Federal Housing Administration (FHA)

Our home loan experts take time to listen to what you want to achieve and then work closely with you to find a Mortgage that fits your needs and budget. You can receive the loan proceeds through:

  • Line of Credit
  • Monthly Payments
  • Loan advance
  • Or any combination of the above

Home Equity Conversion Mortgage at a Glance

A Home Equity Conversion Mortgage is a simply a loan that must meet HUD guidelines, is insured by the FHA, and allows seniors to convert a portion of their equity into cash. Here's everything you need to know about a Home Equity Conversion Mortgage at a glance. We've summarized the information so it's easy to understand the key points.

Key Terms

When considering a Home Equity Conversion Mortgage, it's valuable to understand some of the key terms and what they mean. Here's a list:

Term Definition Formula
Maximum Claim Amount (MCA)  

The lesser of the Appraisal or the FHA County Lending Limit of $679,650


A factor used to determine the Principal Limit

Principal Limit Factor (PFL) Found on the HUD Factor Table and links age of youngest borrower or non-bowering spouse (NBS) to Expected Interest Rate A factor used to determine the Principal Limit.
Principal Limit (PL) Proceeds that the client can access of the life of the loan MCA x PLF = Principal Limit
Mandatory Obligations (MO) Fees, charges, and lien payoffs required by Lender to be paid or held at closing  
Initial Disbursement Limit (IDL) Limit on proceeds available at closing and first 12 months

Greater of either:

60% of the Principal Limit


Mandatory Obligations +10% of Principal Limit

Mortgage Insurance Premium (MIP)

Fee paid to FHA to insure non-recourse feature of the loan

MIP is paid in two (2) phases

  • Upfront in closing costs and
  • Annual MIP of 0.5%, added monthly (servicer adds to loan balance)
Reserves Funds held in reserve from the Principal Limit and available for use at the 13th month of the loan Principal Limit - Initial Disbursement Limit = Reserves

Everything, everywhere

E-Central Credit Union offers mortgage loans to Southern California members throughout Los Angeles County including Pasadena, South Pasadena, Alhambra, San Marino, Arcadia, Sierra Madre, Altadena, Temple City, Monrovia and offers home loans nationwide.
To learn more about our home loans or to apply for a mortgage contact us or visit our Pasadena branch today.