Hello, my name is Richard Carrington. If you’re reading this, then you’re likely interested in learning more about the Home Equity Conversion Mortgage, or HECM, which is the real name of what’s more commonly known as a reverse mortgage.
A reverse mortgage is a safe alternative to other ways to access the equity in your home. It has been around since the Reagan Administration and is a key part of the U.S. Department of Housing and Urban Development’s “RETIRE AT HOME” initiative. It’s a program for seniors (62 years old and older) whose needs may have changed over the years due to retirement, illness, or other life events that happen as we get older, or who wish to access the equity in their home for a wide variety of reasons.
The principal advantages of a reverse mortgage are that, unlike a traditional forward mortgage, monthly payments are completely optional and the borrowers, and even a borrower’s spouse if the spouse is not included in the loan, can live in their home until both have permanently moved out of the home.
Here’s just one example of putting a HECM loan to good use:
Bill and Cindi have lived in their home in Oklahoma City for 20 years and had approximately 5 years left to pay off their traditional mortgage. Their monthly mortgage payment was $890 per month, their home was valued at $200,000, and there was an outstanding balance of about $40,000 on their mortgage.
They needed to do some renovations on their home to address some issues that had come up, but they were now on a fixed income so they didn’t feel comfortable getting a traditional line of credit which would require monthly payments in addition to their $890 mortgage installment, nor could they qualify for a new cash-out refinance. After doing some research, they opted for a HECM to accomplish their goals.
They were able to obtain a new $90,000 HECM loan which paid off their existing mortgage balance and, after paying closing costs, created a line of credit that allowed them to complete the necessary renovations AND, better still, decide on a monthly basis if they wanted to make a mortgage payment or keep that money for other uses.
That’s just one example of how a HECM, or reverse mortgage, can help seniors with their current cash needs. In fact, there are generally no restrictions on what the proceeds of a HECM loan can be used for after paying off any existing mortgages or liens on the property.
Next month, I’ll discuss how to buy a different home using a HECM loan but still get the same benefits the HEMC program offers with regard to optional payments.
I’ve been in the mortgage origination business for over 45 years here in Oklahoma, and if you have any questions at all about whether a reverse mortgage is right for your situation, I would encourage you to call or text me at 405-641-6886 or drop me an email at Rcarrington@pmhlok.com.
Richard Carrington, Reverse Mortgage Specialist - NMLS # 1002271
Prosperity Mortgage, LLC - NMLS #1842936