Financial stability is a priority for everyone but especially for those in Retirement. Unfortunately, amid explosive inflation, economic instability and political unrest, retirees are finding it harder than ever to feel secure. Thousands of American Seniors are finding financial peace through HECM benefits.
The HECM (Home Equity Conversion Mortgage) is a retirement tool designed to allow senior homeowners to utilize the equity in their home to supplement their retirement assets and income to live better.
The basic requirements to qualify include:
- One borrower must be 62 or older.
- The home must be used as a primary residence.
- The home must have a minimum amount of equity determined by FHA.
The Basic Requirements to keep a Reverse Mortgage after closing: Once a homeowner closes on their reverse mortgage they must comply with three basic requirements to honor the terms of the loan.
- Home must be used as their primary residence – Once the homeowner passes away or moves the mortgage must be repaid either through refinancing or selling the home.
- Property Expenses – Basic property expenses such as taxes and Insurance must be paid as long as the homeowner owns the home.
- Livable condition – the home must remain in good livable condition so as to provide a safe environment for the owners.
These are the top 12 HECM Benefits and why they are life changing:
- No Monthly Mortgage Payments: Mortgage payments and interest are deferred until the homeowner no longer uses the home or has passed away.
- Consolidate debts to reduce expenses: If the home has sufficient equity a portion can be drawn to pay off other debts or to use for personal things like vacations, health expenses or personal items like cars.
- Supplemental Income: Some retirees boost their income by electing to receive a consistent monthly payment from the equity of their Home.
- Line of Credit for Financial Reserves: Most retirees worry about unseen emergencies and expenses. For this reason, they choose to leave money in a line of credit which can be drawn down the road.
- Growth Line of Credit: Money left in the Line of credit comes with an automatic growth rate, where available LOC funds will grow by the same interest rate attached to the mortgage. For example, if the mortgage has a 6% interest rate and the homeowner has $100k in their LOC, the LOC will grow by 6% annually. This makes the HECM LOC one of the best places to store unneeded funds for the future.
- Non-Taxable: Money drawn from home equity via a HECM is not considered income and therefore non-taxable.
- Retain Ownership: Just like any other mortgage, the homeowner retains ownership of their home and a lien is placed against the home until the lender is repaid.
- Flexibility: Some people choose to make payments on a HECM which is allowed. Though payments are not required this is a good option to increase the available line of credit and leave additional equity to heirs.
- Government-Insured: HECM’s are guaranteed and insured by FHA which provides for their stability in times of economic instability.
- Equity Protection: The New Reverse Mortgage is designed to retain more equity in the home. this helps reduce interest charges over time and ultimately leaves more equity to the homeowner and their heirs.
- Protection from Housing Market Fluctuations: Even if housing prices fluctuate, the value of the home will not affect the terms of the mortgage after closing.
- Heirs’ Options: Once the homeowner has passed away the property ownership transfers to their estate and heirs. It is up to the heirs to decide if they will refinance to pay off the mortgage but keep the home, sell the home and collect any remaining equity or allow the bank to foreclose on the home.
HECMs are Life Changing:
HECM Reverse Mortgages are Life changing for the right people. HECM Benefits supplement an existing retirement plan and help retires improve their financial situation by extending the life of their retirement income and assets.
If you or someone you love is considering this option and need help understanding the benefits of a HECM to live better in retirement please contact us today.