If you’re retired and are looking for a means to get by on a little more income, you may want to consider looking into Home Equity Conversion Mortgages (HECMs).
What Are They?
Generally, a reverse mortgage is a loan that is agreed to allow a borrower to receive money from the lender by converting the equity already accumulated in the borrower’s house into cash. An HECM is a reverse mortgage that is insured federally, which is a mortgage supported by the U.S. Department of Housing and Urban Development. These types of reverse mortgages are flexible in their use, such as home improvement expenses, medical expenses, or other basic living expenses.
Things You Should Know
Home Equity Conversion Mortgages can have high upfront costs and can be more costly than other home loans. Consider this if you plan to borrow just a small amount or think you’ll stay in your home for a short time because this may not be the right mortgage for you.
The amount you are able to borrow with an HECM depends on a number of factors. For instance, you and your partner or co-owner of your home must be above the age of 62 years old before you can be approved. If one of you is 62 or older, the way around this is to have the younger of you be removed from ownership to ensure the loan. Other factors that influence how much money you can be loaned are the appraised value of your home, the type of mortgage you select, and current interest rates. You also must be in good standing with paying your property taxes and homeowner’s insurance and be willing to continue paying these expenses.
You do not need a certain amount of income to be eligible for an HECM. But, lenders must determine if they will approve or close the loan through a financial assessment. Through this assessment, they will evaluate your ability to meet the requirements of the mortgage.
Ways To Make Payment
There are several payment options for an HECM that you can evaluate and see if any fit for you:
• Line of Credit – a standby line of credit that borrowers can access only when they need the funds.
• Term Payment – fixed monthly payments for a specified amount of time. The monthly amount received will not change over this fixed time, even if your estate’s value decreases over time.
• Tenure Payment – fixed monthly payments that will only stop when you leave your home, or you pass away.
• Lump Sum – one full payment that is of lesser value than what you may qualify for.
• Or modifications of any of these methods
