HECM loans, or Home Equity Conversion Mortgages, are also known as Reverse Mortgages, and are used to help your equity work for you after retirement. It’s important to understand the facts of reverse mortgages to help you understand if it’s the right path for you.
Experts in reverse mortgages are on hand to help educate you on HECM loans and get you or your elderly parent into a program that will ease the financial burden by using the equity you already have in your home.
What Is a Reverse Mortgage?
A reverse mortgage is offered by banks to retired seniors 65+ as a financial tool, allowing you to utilize the equity you’ve built up in your home without having to sell it or make payments for the remainder of your time in the home. Like the name suggests, a reverse mortgage is the reverse of a traditional mortgage.
The value of your home is divided into two parts: the equity (the amount of the house you own) and the debt (the amount owed on the house). A traditional mortgage entails monthly payments to the lender each month, and each payment increases your equity and decreases your debt, eventually leading to owning 100% of your home.
Benefits of Reverse Mortgages
With a reverse mortgage, the lender gives you money instead through the equity you’ve built up over your lifetime of living in the home. Essentially, your loan is being paid by your equity, so a reverse mortgage results in reducing equity and increasing debt. However, you do not need to make mortgage payments on the home while the title to the home remains in your name or the name of your trust.
You can also get a reverse mortgage on the purchase of a new home, assuming it will become your primary residence. If you sell your home and use some of the cash proceeds as a down payment you can use a reverse for purchasing a home loan to acquire the new house. If you don’t want to tie up all of your money in a house to be prepared for unexpected expenses, want increased cash flow in retirement, or cannot afford to pay a monthly mortgage payment, this option will work well for you.
Other Benefits of Reverse Mortgages
- Tax free!
- Improved retirement
- Reduce distribution drain
- Reduce retirement risks
- Consolidate debt
- Growing line of credit
- Increased cash flow
- Improved lifestyle
- Fund long term care
- Pay off consumer debt
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Our goal is to ensure our clients have the knowledge and guidance they need to make an educated decision about a reverse mortgage, and our experts are here to answer your questions and provide you with tools and resources to help you discover if a reverse mortgage is right for you.