What is a reverse mortgage?
HECM stands for home equity conversion mortgage. Reverse mortgages allow for seniors to release a portion of the home’s equity to eliminate any existing mortgage payments or to receive the cash that is currently locked in the home’s equity without having to sell the home. HECM’s are unique in that there are no monthly mortgage payments required to pay; to find out more click this link how it works.
What a reverse mortgage is NOT?
It is very important for seniors to realize that the HECM reverse mortgage is not the perfect solution for all, and that there times when it should be avoided. Here are some instances or scenarios for which the reverse mortgage should not be taken out.
- Shorter time period than 5 years. If you are thinking about taking out a HECM for short term needs there may be cheaper options such as a home equity line of credit. Those who want to avoid payments for the 5 years should do research on home price appreciation to make sure that the area has a decent appreciation to offset any lending costs.
- Spouse is not listed on the title. Avoid doing a reverse mortgage when the spouse is under 62 years of age and or not on the title. The loan becomes due and payable when the borrower passes away.
- Taking out the funds to invest into a stocks or any investment with risks. If you are comfortable in your retirement and have been approved to take out your home’s equity for any investment be very careful to not fall into any scams. Investments can go up but they can also loose all of your initial investment.
- Homes with low value. Please note that the closing costs will be a very high % of your homes current value. Higher value homes the closing costs will be a much smaller percentage of the value and, therefore, not that significant.
- Invest in annuities. Again avoid taking out the equity to invest but specifically into annuities as the HECM loan has a term/tenure payment that is extremely similar to an annuity program but no money has to come out of your pocket.
- Don’t need the funds or have other cash available at a lower interest rates. Reverse loans are NOT free money. If you need some short term cash look at tapping into IRA’s, CD’s, savings before considering a reverse loan option. Take your time in making a decision and figure out how much money you need and how much it will cost you to access that cash.
- At least one borrower must be 62 years of age or older.
- You must own and live in the propery as the primary residence (it’s ok to have a mortgage balance).
- Have sufficient equity available (current value of your home subtract any debt/mortgages this is your equity).
- Never have defaulted on government backed loans/debt.
- Can afford to pay for home’s taxes/insurance and maintenance.Great. I Qualify but is this the right option for me?
Reverse mortgages are not a fit all solution, they are great for seniors who need to:
- pay off an existing mortgage loan
- to supplement your retirement income
- to pay for medical costs
- for home repairs or improvements
The proceeds from a reverse mortgage can be used as you wish there is no restriction after you receive the funds.
If you are not sure if you will qualify or would like to ask additional questions first, don’t hesitate to reach out to one of our knowledgeable agents (the call is toll free 855-999-2293).
or click on the button above to fill out our contact form
Comparison of Benefits vs. the negatives?
|Tax free income (never taxed)|
|Funds may be used for any purpose – no restrictions||May impact Medicaid benefits (not Medicare)|
|Own and remain in your home (no need to sell in retirement to get money out of the home)||Reduces equity to pass on to heirs|
|No monthly payments to the lender||Pay homes taxes/insurance|
|Can never owe more than the value of your home at repayment (non-recourse loan)|
|Does not affect Social Security or Medicare benefits|
|Pays off an existing mortgage, leaving no monthly mortgage payments|
|No longer expensive some lenders are waiving origination fees also HECM saver reduces costs|
|Receive funds as a lump sum, monthly income payments for life, and/or line of credit|
|You can retire in the property for life (even if home values drop significantly)|
|No risk of foreclosure|
|Your equity now your equity in the future (you keep ownership and decide what to do with your equity)|
With a home equity conversion mortgage loan you have flexibility as to how you receive the proceeds. There are 3 different options:
- Lump sum. This option you will receive a lump sum of money upfrony. This amount can be up to 50-70% of the home’s appraised value. The interest rates are fixed on the HECM lump sum option.
- Lifetime monthly income. This option will allow you to receive a lifetime source of equal monthly proceeds/income. The rates are adjustable and depend on your age and the available equity in your property.
- Credit line. With this option, the bank/lender qualifies you for a certain amount of money. You have access to this money when you wish and will only pay interest on the portion that you have borrowed. The interest rates are adjustable.
The Answer is YES!
Can I access my equity without making a mortgage payment or selling my home?
I will be able to receive my funds in either a – lump sum, credit line, monthly income?
I wont have any restrictions or taxes on the money I borrow?
Are HECM interest rates still at all time lows? Can I retire and eliminate my current mortgage payment?
Can I use the reverse mortgage loan to pay off other debts?
Can I use the HECM loan to avoid Bankruptcy?
Will I keep ownership of the home (not the bank)?
Will I be able to leave my home to my heirs?
Is it right that my heirs/estate are not held responsible for my mortgage debts?
Is it true that I won’t run the risk of foreclosure as long as I pay for property taxes/insurance?
Will I be able to decide whether I want an adjustable or fixed interest rate?
Are there lenders who will not charge me an origination fee or a reduced fee?
Can I avoid high upfront mortgage insurance premium with the HECM Saver?
Can I sell my home or refinance at any time?
Is it true that there are no early pre-payment fees?
I will not loose access to other government benefit such as medicare eligibility – Social Security?
Can I still qualify for the HECM loan without income or good credit scores?
Can I take out more equity in the future if I have equity at that time?
That some double wide mobile homes can qualify?
I can change my mind even after signing the closing documents before 3 days are up?