A Home Equity Conversion Mortgage (HECM) loan, also known as a reverse mortgage loan, can be an important financial tool that allows homeowners 62 and over to access a portion of their home equity. Below are five questions to ask yourself if you’re considering a reverse mortgage.
If you plan on living in your home long-term a reverse mortgage may be right for you. If you are planning on moving or selling your home, a reverse mortgage may not be worth the high cost; although, they become more affordable as time passes.
Seniors on the lookout for the perfect retirement home can leverage the HECM for purchase program, which allows the use of equity from the sale of a previous home for the initial down payment on a new primary residence, without incurring any new monthly mortgage payments.1
Borrowers must live in the home as their primary residence, remain current on insurance and property taxes, and are responsible for maintaining the property.1
A reverse mortgage becomes due when the borrower dies or moves out, which could affect others living in the home with you. A qualified non-borrowing spouse can remain in the home after the borrower passes, but they are not protected in the event the borrower moves to a care facility or nursing home for more than 12 months.2
Heirs can choose to pay off the loan to keep the home, or they can choose to sell the home and keep any remaining equity. To leave heirs with a more valuable inheritance, consider limiting the amount of equity that you withdraw.
A reverse mortgage is often used to consolidate debt, make home repairs or improvements, and to cover medical and retirement expenses.3 While proceeds can be used however the borrower likes, using a reverse mortgage to fund vacations, a new car, or other material items may not be a responsible use of the funds.
If you’re considering taking out a reverse mortgage as part of your retirement plan, call 1-800-976-6211 to speak with a licensed reverse mortgage specialist about your options.
1 Your current mortgage(s) and any other existing liens against the property must be paid off at or before closing. You must live in the home as your primary residence, continue to pay required property taxes, homeowners insurance, and maintain the home according to FHA requirements. Failure to meet these requirements can trigger a loan default that may result in foreclosure.
2 A spouse must meet the following requirements to be considered eligible: 1) Be the spouse of the reverse mortgage borrower at the time of loan closing and remain the spouse of the borrower for the duration of the borrower’s lifetime. 2) Be properly disclosed to the lender at origination and specifically named as a Non-Borrowing Spouse in the loan documents. 3) Occupy, and continue to occupy, the property securing the reverse mortgage as the principal residence.
3 Your HECM loan will accrue interest that together with principal will have to be repaid when the loan becomes due.