A Reverse Mortgage Loan May Be Just Right For You
The FHA-insured HECM [Home Equity Conversion Mortgage Loan] provides two primary options to extract home equity funds from the ground as a means to manage senior lifestyle expenses. One choice is to determine the total amount of home equity funds that can be made available to the borrower (an amount based on the youngest borrower’s age, current interest rates, value of the home, and other factors) and request that a portion of those funds be distributed as a loan draw on a monthly basis.
That is why this option is more commonly referred to as the “reverse mortgage”, ie., the borrower is not making a monthly bank loan payment but is, instead, receiving partial home equity distributions wired into the checking account each month.
A second choice is to leave the available funds in the HECM Home Equity Line of Credit. In this scenario, the credit line may be accessed as needed.This is the option most often used to fund elder health care costs.
And, the line of credit can actually grow larger over time to provide additional funds available for borrowing at a later date.
Why you should care… If a retirement pension is not available, if the social security income is insufficient, if the savings and investments did not succeed, then what are a retiree’s options!?
While one choice is always to sell the home, the following questions then become “Now what?” and “How long will the money last?”
So why not stay in the home and use the home equity funds as needed, to have loan proceeds distributed in partial increments to cover retirement income shortfalls or, most likely, to pay for those inevitable elder health care expenses?
While you retain the title and deed, your loan is secured by a lien, and the loan payoff can be called due if you do not pay your property taxes and homeowner’s insurance, maintain your property, and otherwise comply with the loan terms.