With reverse mortgages, getting the kind of life you’ve always dreamed of after retirement might be easier than you think. If you don’t have funds to pay off debts, medical bills, property taxes and more, this loan can help.
It basically allows you to borrow money against your home’s equity. There are three kinds, one of them being the Home Equity Conversion Mortgage, or HECM. Want that option? Read on.
HECMs for seniors
These mortgages are financially backed by the U.S. Department of Housing and Urban Development, or HUD, and are geared towards providing seniors with a way to convert the equity in their homes into funds.
On borrowed money
The amount you borrow is based on:
* The appraised value of your property. This is subject to limitations by the Federal Housing Administration, or FHA.
* Your age. You must be at least 62 years old to qualify.
* Current interest rates. Some mortgages offer variable interest rates tied to market conditions. Others offer fixed-interest rates, but the money you can borrow isn’t as much as what you can get with a variable rate.
* Financial assessment of you. You must be willing and able to pay for property taxes as well as your homeowner’s insurance.
Basically, three things ensure you can borrow more money: if you’re older, have a large amount of equity in your home and don’t owe anything on it, or if you do, owe as little of it as possible.
Before Applying for an HECM
You’ll need to meet with an independent housing counseling agency, one approved by the government. The counsellor will explain everything you need to hear, from basic information to what you can expect and the alternatives you have to get an HECM, single-purpose or proprietary mortgage. This way, you have a solid understanding of the costs and financial consequences that would come your way.
