What is an HECM Loan?
If you’re having trouble making ends meet, are 62 years of age and have substantial equity in your house, you might qualify for an HECM loan (Home Equity Conversion Mortgage), typically referred to as a reverse mortgage. The HECM plan is insured by the FHA (Federal Housing Administration) and permits the elderly to have access to a part of the equity they’ve built up within their house. The money accessed with an HECM may be used for anything the borrower selects, from updating their home to paying off medical bills.
HECMs may be useful financial tools for those qualified. Besides being at least 62 years of age, some important requirements involve:
* Owning the home outright, or at least, having a considerable amount of the mortgage paid off
* Occupying a house as your main residence
* Not being delinquent with any federal debt
* Going to a session with an HECM counselor who is HUD-approved
The quantity of money available, also referred to as the principal limit, from the HECM loan is decided by:
* Youngest borrower’s age
* Present interest rates
* Balance of an existing mortgage, if applicable, and mandatory obligations as defined by HECM requirements
* Lesser of the appraised home value, sale price or FHA maximum lending limitation
The funds available to you might be limited for the first year after loan closing, because of HECM requirements.
With fixed rate HECM loans, it’s possible to get the cash in a lump sum. Whereas with adjustable rate HECM loans, it’s possible to select from these options for disbursement:
Tenure– Equal month-to-month payments which will continue as long as at least a single borrower continually occupies the home as their main residence.
Term– Equal month-to-month payments which continue for a certain amount of months.
Line of Credit– Any unscheduled payments during times and within quantities specified by a borrower, available until the credit line is depleted.
Modified Tenure– Combination of scheduled month-to-month payments and a line of credit, as long as at least a single borrower continually occupies the home as their main residence.
Modified Term– Combination of scheduled month-to-month payments and a line of credit for a certain amount of months.
Single Disbursement Lump Sum– A single payment at a loan’s closing.
For more information on our HECM loan, contact Longbridge Financial today.