Is the HECM Reverse Mortgage Right For You?
At Gracemark, we know that it is hard to decide if a Home Equity Conversion Mortgage (HECM) is right for you as a home buyer. The HECM program is a type of reverse mortgage created by the Federal Housing Administrative (FHA). The design of the HECM is to assist home buyers aged 62+ in buying a new home in their current stage of life with no future home loans.
What Is a Reverse Mortgage?
Deciding if a reverse mortgage is right for you is a huge undertaking. There are a few things you need to know, including what exactly a reverse mortgage is. A reverse mortgage is a type of home loan that allows you, as the homeowner, to borrow money using your home as security. It’s for homeowners that are 62+ years of age, and the amount the homeowner owes goes up, not down. It goes up due to interest and fees that are added to the loan balance each month.
A reverse mortgage loan is a type of loan you back when you no longer live at or sell the home. You may also have to repay the loan sooner if you fail the following requirements:
- You failed to pay property taxes,
- You failed to pay homeowners taxes, or
- You failed to keep your home in good repair.
There are a few types of reverse mortgages, including the most popular the HECM. Talk to your lender to decide what type of reverse mortgage works best for you.
How Does the HECM Program Work?
A requirement of the HECM program is for the buyers to provide a down payment to cover a certain percentage of the home purchase price based on specific criteria. The point of this is to cover the difference in the HECM proceeds and the selling price of the home plus home closing costs. In this type of reverse mortgage, the payment comes from the equity of the sale of the buyer’s previous home.
The requirements for the HECM program are simple.
- You must be at least 62 years of age.
- You must own the property or have a small balance to be cleared by the HECM proceeds.
- You must occupy the property as your primary residence.
- You cannot be delinquent on any federal debt.
- You must have the financial resources to pay the ongoing charges, including property taxes, insurance, Homeowner Association (HOA) fees, etc.
When you speak with your lender, they will evaluate your ability to pay insurance, property taxes, and property maintenance, but the FHA does not require a minimum income or credit score to get a HECM.
What are the Benefits of the HECM?
With the HECM program, there are no monthly mortgage payments as long as the buyers occupy the home as their primary residence. This allows homeowners to increase their purchasing power and preserve their hard-earned cash to maintain a comfortable retirement.
As more homeowners are being introduced to the HECM program, many of them are choosing this financing solution rather than paying solely in cash or committing to a home loan payment during their retirement.
You can finally move into the home of your dreams and secure your standard of living! No home loan and no monthly mortgage payments mean your lives open up to travel, hobbies, further improving your lifestyles, and spoiling your grandchildren.