HECMs (Home Equity Conversion Mortgage), are the most popular reverse mortgage program there is. It is insured by the Federal Housing Administration (FHA) and may have several benefits to you if you meet the age requirement of 62 and own your home. These mortgages are not new by any means. Did you know the first HECM was offered in 1989 and is provided by the U.S. Department of Housing and Urban Development (HUD)?
FHA insured HECM is a non-recourse loan which ensures that borrowers, nor their heirs, will be personally responsible for the payoff in the end. Let’s look at the benefits of how an HECM can benefit you?
1. Retirement Income Planning Tool
People are living longer than ever before, and many may not have enough money saved for retirement. Most people overlook the benefit of using home equity as a retirement income source. You have worked hard your entire life to pay for your home so why not use it to pay yourself back?
This is the time of your life when you’re ready to relax and enjoy the fruits of your labor. Maybe it’s time to make those travel plans to places you have always dreamed of visiting. Or maybe you want the freedom to visit and spoil your grandchildren. The last thing you want to worry about at this age is income and how to pay the bills. A HECM reverse mortgage provides an opportunity to convert some of your home equity into cash. It will allow you to take out a loan against the equity in your home but without the worry of having to repay the loan during your lifetime. A HECM does not become due and payable as long as you are living in the home as your primary residence and continue to pay your property taxes and maintain insurance on the property. You can increase the amount of money available to fund your retirement with tax free HECM proceeds.
2. Spending Limit Increased
As of January 2021, the U.S. Department of Housing and Urban Development announced that the reverse mortgage lending limit for the HECM program will be raised from $765,600 to $822,325.
Depending on your age, the value of your home, and what the balance of your mortgage is, this could give you an extra 30 to 40 thousand dollars in payments for those with higher end property values. The increases have been steady every year since 2018, but never promised to be permanent, only temporary.
However, this 2021 increase is a permanent increase and HUD and the FHA have instituted several relief measures aimed to reduce the economic strain. The main reason for the now permanent increase has been due to the Covid 19 pandemic.
Having more money during a time like this is priceless for most retirees. Another great benefit is if you have had serious credit delinquencies, late taxes, or insurance in the past 24 months, HUD will require lenders to set funds aside to pay future payments of taxes and insurance.
Bottom line, an increase in limits could be more money in your pocket. Just think of the peace of mind you will have with more money to do the things you want to do.
3. The HECM Should Not Be A Last Resort.
It is important to understand that an HECM reverse mortgage is not a welfare program. If not understood correctly, they can get a bad rap from some mortgage companies or financial advisors who do not fully understand the value they can have on a better quality of life.
Some myths floating around say that a reverse mortgage should be your last resort, when in fact it should be one of the first things you look into when planning your retirement. It can actually be one of the best things you can do for yourself and your future legacy.
As Americans we have been conditioned to believe that the goal of homeownership is to pay off your home. Period. This cultural belief dates back to the Great Depression when mortgage-note-burning parties were common. Subconsciously teaching us that the main goal in life is to be free and clear of ALL debt. Although nobody wants to be in debt, your home is unlike traditional forms of debt like credit cards, medical bills, personal and business loans, etc. There is no shame in a reverse mortgage.
If we haven’t spoken in a while, let’s touch base and I’ll catch you up on all the ins and outs of HECMs to make sure you and I have all the information we need to best serve you
If you have any additional questions about this subject, we’re happy to help. Simply contact us by calling (504) 833-2111, or click here to apply now online.
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