How does a HECM Loan Work?

How does a HECM Loan Work? Answer: Just like your conventional mortgage but with no payments.

Misconceptions:

People tend to fear what they don’t understand. Reverse Mortgages often get a bad rap because people think they are more complicated than they really are. The way I explain Reverse Mortgages is that mechanically they are the same as a conventional mortgage but without the payment.

Mechanics:

A Reverse Mortgage functions like any other mortgage or loan from a bank. You are borrowing money from the bank, in exchange, the bank is charging you an interest rate. On most loans, you’re required to make a monthly payment to pay that interest and part of the principal until the loan is repaid.

On a Reverse Mortgage, the payment is optional. You’re still charged interest every month but instead of a mandatory payment the interest is added to the balance of the mortgage and repayment is deferred until the homeowner passes away or no longer lives in the home.

Obligations:

If you have a Reverse Mortgage your primary obligations are:

1. You will continue to pay basic property expenses such as taxes, insurance, HOA, etc.
2. The home will be used as your primary residence.
3. You will keep the home in an acceptable living condition.

Benefit:

For most this is the life-changing benefit of the Reverse Mortgage. To be able to go the rest of your life without making a mortgage payment and knowing the remaining equity in your home will still go to your heirs.

Imagine living on a fixed income of $30,000 a year and being able to eliminate a Mortgage payment that takes $12,000-$15,000 of that income. Such a step is truly life-transforming for our clients and why so many people are doing a Reverse Mortgage.

If you or someone you love needs more information on a Reverse Mortgage Call us today.