What is it?
A Home Equity Conversion Mortgage, or HECM, is a type of reverse mortgage. It shares a number of similarities with traditional loans: your property serves as your collateral, there’s a monthly interest rate you need to pay for, you’ll need to pay for the amount within a given time frame, and you still have ownership rights and therefore responsibilities to the home.
What are the differences?
However, unlike traditional loans, you don’t need to make monthly payments and there’s no specific date for when you need to pay off the loan. The bank or lender will give you the money; it could be in one large go, monthly increments, a line of credit, or an arrangement that allows for all three. You don’t have to worry about paying off the loan since the loan will be paid back when you or whoever is named in the loan passes away or permanently moves to another home.
What are the benefits?
You get the money you need for sudden repairs or expenses. If you require long-term health care, then opting for an HECM can provide you with the funds to cover the costs of those health plans. Can’t make do with the pension or benefits you live on? An HECM can give you some breathing room so you won’t have live on the edge, financially.
What do you need to remember?
There are standard fees and requirements. Make sure you know what these are, from the age requirement (you’ll need to be 62 years of age and up), having to live in the home (so yearlong vacations in sunny Asian beaches are out), and your ability to pay off your future property taxes.
Take the time to know if HECM is a good financial solution for you. Look around for a good HECM company near you. Visit this website for more information.
