Given the right circumstances, the Home Equity Conversion Mortgage, or HECM, might just be the financial tool you need. It’s a type of reverse mortgage insured by the Federal Housing Administration, or FHA.
Amount you can borrow
This depends on your age (you need to be 62 years old or older, though, to qualify for this loan in the first place), the current interest rate in the market and the appraised value of your home. That or if the FHA limitation applies to your situation.
Repayment
One of the best features of a home equity conversion loan is that you don’t have to worry about repaying the amount. So long as you fulfill certain requirements, you can convert your equity into cash. If you need to boost your income, this is one way to make that happen.
Conditions
You need to keep up with your payments. You can’t default on your taxes, homeowner’s dues or your insurance premiums. That’s going to compromise the agreement and render it meaningless.
Estate for your heirs
In the event that the home is sold, or you move out of the home, then all the cash, as well as interest and other costs involving the HECM, must be repaid. If there’s any remaining equity, then those are going to be transferred to your heirs.
No debts
One of the good things about HECM is that you can only owe up to the appraised amount of your home. There might be certain limitations put by the FHA as well. That’s all good news. With such measures in place, you’re only able to borrow money that’s well within the amount of your home equity. That means you won’t have to worry about leaving any debts for your heirs.
Depending on your situation, HECM can offer you the best means to get you out of your current financial fix. Find out how. Start with these tips.
