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Reverse Mortgages | HECM
Reverse Mortgages
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Are private loans that are backed by the companies that develop them. If you own a higher-valued home, you may get a bigger loan advance from a proprietary reverse mortgage. So if your home has a higher appraised value and you have a small mortgage, you might qualify for more funds.
HECM - Home Equity Conversion Mortgages
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Are federally-insured reverse mortgages and are backed by the U. S. Department of Housing and Urban Development (HUD). HECM loans can be used for any purpose. Before applying for a HECM, you must meet with a counselor from an independent government-approved housing counseling agency.
How do these Mortgages work?
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If you’re 62 or older – and want money to pay off your mortgage, supplement your income, or pay for healthcare expenses – you may consider a reverse mortgage. It allows you to convert part of the equity in your home into cash without having to sell your home or pay additional monthly bills.
When you have a regular mortgage, you pay the lender every month to buy your home over time. In a reverse mortgage, you get a loan in which the lender pays you. Reverse mortgages take part of the equity in your home and convert it into payments to you – a kind of advance payment on your home equity. The money you get usually is tax-free. Generally, you don’t have to pay back the money for as long as you live in your home. When you die, sell your home, or move out, you, your spouse, or your estate would repay the loan. Sometimes that means selling the home to get money to repay the loan.
If you get a reverse mortgage of any kind, you get a loan in which you borrow against the equity in your home. You keep the title to your home. Instead of paying monthly mortgage payments, though, you get an advance on part of your home equity. The money you get usually is not taxable, and it generally won’t affect your Social Security or Medicare benefits. When the last surviving borrower dies, sells the home, or no longer lives in the home as a principal residence, the loan has to be repaid. In certain situations, a non-borrowing spouse may be able to remain in the home.
Can I purchase a home using a Reverse Mortgage?
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With the HECM for Purchase reverse mortgage, the borrower provides a down payment using the sale of the previous home or other savings. The equity earned through the down payment and the new home’s value is then used to calculate the reverse mortgage loan amount. The borrower can choose to repay as much or as little as they like each month, or make no monthly principal and interest payments. The flexible repayment feature makes it easier for a buyer to afford the home they really want, preserve more savings and retirement assets, and improve cash flow. As with any mortgage, the borrower must keepcurrent with property-related taxes, insurance and maintenance as part of their ongoing loan obligations. Repayment is generally required once they sell the home, pass away, move out or fail to meet their loan obligations. For many homeowner’s who are ready to retire, this may be a great option when downsizing or moving to milder weather.
Want to Learn More?
Our team of dedicated loan experts can answer any questions you may have regarding residential financing, whether you’re a first time home buyer, looking to refinance, or shopping for a second home. We are here to assist you.
