What Are HECM Loans and How Do They Work?
HECM stands for “home equity conversion mortgage” and is a type of reverse mortgage loan. Reverse mortgages are loans that qualified homeowners can use to eliminate mortgage payments and receive income as part of their overall retirement plan. You can receive a free quote from an HECM lender to determine your eligibility.
Key Benefits of HECM Loans
HECMs are insured by the Federal Housing Authority. Therefore, if the value of your home decreases due to a decline in the housing market, you are not penalized. The loan amount can never appreciate more than the value of your home, and the FHA is responsible for the difference between the loan amount and your home’s value.
With HECM loans, you are able to choose how you want to receive your income. For instance, your HECM lender gives you the option of receiving a one-time payment, monthly payments or opening a line of credit. You can also choose a combination of these options depending on your needs.
As a borrower, you continue to own your home as long as you keep up with maintenance and stay current on property taxes and homeowner’s insurance. You can also pass down your home to beneficiaries. Beneficiaries choose whether to keep the home and make payments on the loan or sell the home to pay the full balance.
How to Qualify for an HECM Loan
If you are at least 62 years old, own and live in your home, and are current on federal and property taxes, you may qualify for an HECM. The Qualification also depends on your ability to repay the loan. The income you are eligible to receive is based on your age, the value of your home and the amount equity you currently have.
If you are not sure whether this type of financing is right for you, talk to an HECM lender about your eligibility. You may find that an HECM loan can help you make the most of your retirement.