You’ve heard a lot of HECM or Home Equity Conversion Mortgage or Reverse Mortgage. But what is this mortgage that is beneficial for senior borrowers? What are the benefits and the possible disadvantages of taking one?
Are you in a situation wherein you are not working anymore, and you have a lot of time in your hands to enjoy the things you want, but maybe you cannot do so because you don’t be the financial flexibility to do it? It can be frustrating to be retired and tired because you are not financially free. HECM is a mortgage specially designed for senior borrowers.
Why should I apply for a HECM?
HECM mortgage gives senior Americans the flexibility to enjoy their money during retirement. There is no limit to how you will spend the money that you are going to get from the loan proceeds. You can even use the reverse mortgage proceeds to help you defray your caregiver’s cost and other in-home care needs. Or, go on a cruise and see the world to your heart’s desires.
To make sure that your living spouse, and your heirs, will be protected if you, as the principal borrower passes, HECM borrowers need to pay for their insurance premiums. This will make sure that they will not pay more than the value of the home at the time of the sale.
To avail of the reverse mortgage, you need to be at least 62 years old, and your home equity must be enough to qualify, which is usually 50%. Also, you must maintain the property tax payments aside from the homeowner’s insurance, and the home must always be at par with the FHA standards.
What are the downsides of HECM?
One glaring downside is that your heirs will have less inheritance. If you take a reverse mortgage early on in your retirement and your needs suddenly change later on as you grow older, it might be a cause of regret.
Just like any other financial decision, make sure that you weigh the pros and cons of your decision to take a reverse mortgage.