HECM’s or Reverse Mortgages – A Good Choice?
Many senior-aged homeowners have built up substantial equity in their homes. Consider that homes have doubled in value in the last 20 years, and it’s created a windfall of wealth (on paper).
A reverse mortgage is a unique type of mortgage. It’s different than a home equity loan or home equity line of credit. Those types of loans and a traditional mortgage involve receiving money that must be paid back over a period of time.
With a Home Equity Conversion Mortgage (HECM), the homeowner borrows a specific amount or receives monthly payments from a bank or finance company. No repayments from the borrower are required, and instead the total of the payments issued to the borrower plus interest and fees, is taken from the total value of the property upon the person’s death.
Why Would Anyone Use a Reverse Mortgage?
- helps generate needed cash to live comfortably in your retirement
- helps to provide funds for medical services or traveling
- you can live in your home until you pass away
- you may be able to pay off your remaining current home mortgage
- may be preferable to mortgage refinancing for some seniors with mortgage debt owing
- the funds you receive are tax exempt unlike funds from your 401k
- you’re protected in your property value falls below the amount you owe
What are the Dangers of a Reverse Mortgage?
- your heirs will receive less in their inheritance
- you could lose the home due to foreclosure (defaulting on property taxes, HOA fees, homeowners insurance, etc.)
- it may affect whether you can qualify for government programs such as Medicaid or supplemental security income
- complicated rules, clauses and terms that only a lawyer would understand
Preconditions for Applying for an HECM
Homeowner HECM applicants must be 62 years of age to apply and not have any Federal debt. The borrowers are required to use the property as their principal residence, keep it in good condition, and continue paying property taxes and homeowners insurance.
Loan Repayment Terms
Homeowners also retain title of the property until they pass away. The loan has to be repaid when the borrower no longer lives in the home. If the home value is less than the amount borrowed, no action is taken by the lender. Any remaining value of the home (e.g., home value rises for more homeowner equity), the proceeds go to the borrower’s estate.
If it is a couple who use a reverse mortgage, the debt is subtracted from the sale of the home upon the death of the surviving homeowner. Loans are predicated on the age of the younger of the couple.
If a lender approves your application for a homeowner equity conversion loan you will be required to attend an information session given by an approved HECM counselor.
With a home equity Conversion mortgage, you can cancel it within 3 days. You notify the lender in writing and the lender has 20 days to return any money you’ve paid.
Finding a Reverse Mortgage Lender
It’s important to be working with a legitimate reverse mortgage lender, and not a scam outfit hoping to prey on unsuspecting seniors. It’s best to visit the better business bureau to find a list of accredited reverse mortgage lenders. The danger with unethical lenders is that they may be able to take your home.
Reverse Mortgage Lenders
AMERICAN FINANCIAL NETWORK INC
2790 NW 43RD ST STE 200
GAINESVILLE, FL 32606
BANK OF ENGLAND
235 N ORANGE AVE STE 200
SARASOTA, FL 34236
1 SEAPORT Sq, BOSTON
Reverse Mortgage Funding LLC,
1455 Broad St., 2nd Floor, Bloomfield, NJ 07003,
CROSSCOUNTRY MORTGAGE, LLC
9130 GALLERIA CT STE 101
NAPLES, FL 34109
All Reverse Mortgage, Inc
2019 W Chapman Ave,
Orange, CA 92868
Reverse Mortgage California
9125 Archibald Ave,
Rancho Cucamonga, CA 91730
Trinity Reverse Mortgage
1600 S Main St #195,
Walnut Creek, CA 94596
Mutual of Omaha Reverse Mortgage
11801 Pierce St Suite 200, Office 254,
Riverside, CA 92505
American Advisors Group (AAG)
AAG Retail Branch – Austin, TX
9601 Amberglen Blvd., Suite 260
Austin, TX 78729
Griffin Financial Mortgage Llc
1701 River Run, Fort Worth, TX 76107
Read further on how to increase the value of your home to earn more, and use your home’s value as a source of needed funds.
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