Reverse Mortgage (Home Equity Conversion Mortgage)
Fixed or Adjustable Terms
A HECM (Home Equity Conversion Mortgage) is a special type of mortgage that enables homeowners age 62 or older to tap into the equity in their home. Unlike traditional home loans, no repayment of the HECM loan is required until they no longer occupy the home as their principal residence. At that time, the lender will declare the mortgage due and payable. What is borrowed plus interest is due to the lender, remaining equity remains with the estate.
Must be a minimum 62 years of age. Age of the youngest borrower determines eligibility.
- Non-Borrowing Spouses under 62 are accounted for.
Max claim amount is the lesser of: - FHA Mortgage Limit ($636,150)
- Appraised value
- Purchase price
Expected Rate = Fixed Rate / Adjustable Margin + 10 Year SWAP
Generally, the lower the rate, the older the borrower is and the higher the value of the home, the more proceeds they qualify for.
No monthly mortgage payment is ever required
Credit line growth rate
- Unused available funds grow at the same rate as the interest being charged
- Guaranteed regardless of equity position
Borrowers should look at home equity as asset allocation that is accessible
No pre-pay penalty – make payments if you want (I/O)
Funds are tax free
Homeowners keep all future appreciation, no equity sharing
Borrowers retain Title to the home
No limitations to how the borrower may use the funds
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