Financial security typically decreases the closer you get to your retirement years. After all, you’ll need to downsize your costs. For most people, it means relying on their social security, pension and Medicare benefits. If you want to boost your financial security during your retirement years, you might want to consider a Home Equity Conversion Mortgage, or HECM.
HECM Basics
The first thing you need to know is that these typically cost a lot more than a single-purpose mortgage. That’s something you’ll need to factorin, especially if the amount you need to borrow is small, or if you don’t plan on living the rest of your life in the property. That’s because one of the stipulations of an HECM loan is that you need to live in residence for the loan to apply. If you move out or live out of the home for more than a year, you can lose your home.
Amount Borrowed
If you opt for an HECM for purchase, eligibility depends on the following:
* Your age. You need to be 62 or order in order to qualify.
* The type of reverse mortgage you want. HECMs and proprietary mortgages often give you bigger funds, but they do tend to come along with bigger costs too.
* Current interest rates. Most offer variable-interest rates, subject to the whims and changes of the market. An HECM, though, is the only type of reverse mortgage that offers a fixed-rate loan. However, you typically get less money, so most homeowners who want to make the most out of the exchange opt for variable rates instead.
* Assessment of your financial capability to pay for your property taxes as well as homeowner’s insurance.
Conclusion
Know what you’re getting into. Ask for guidance and assistance from a housing consultant, lender or reverse mortgage professional.
