Seniors that reside in a house can get money by preparing a reverse mortgage through the Federal Housing Administration (FHA). The Home Equity Conversion Mortgage (HECM) allows those who are 62 or older access to their home’s equity as long as they have paid off the majority or all their mortgage. This basic overview might help you know more about HECM.
How Does This Work?
An HECM takes the equity in your house and turns it into cash you can use for home improvements, debts, or whatever you desire. A borrower of an HECM does not need to make monthly payments to repay the loan unlike a conventional mortgage until they are no longer inhabiting the house as their principal residence. At that stage, the loan must be repaid, or the sum is taken in the equity of the house.
What Are the Eligibility Requirements?
As mentioned previously, the only folks that are eligible for this kind of loan are those age 62 or older. There are some additional requirements for example:
- Own the property outright or paid-down a Substantial sum
- Occupy the property as your main residence
- Not be delinquent on any federal debt
- Have financial resources to continue making timely payments of continuing property fees (such as property taxes, insurance, and Homeowner Association fees, etc.)
- Participate in a customer information session given by a HUD-approved HECM counselor
- Income, assets, monthly living expenses, and credit history will be confirmed
- Timely payment of property taxes and hazard and flood insurance premiums will be confirmed
- Single family home or two-to-four unit home with one unit occupied by the debtor
- HUD-approved condo project
- Manufactured home that meets FHA needs
HECM vs. Home Equity Loan
A home equity loan is a second mortgage which places another lien on your dwelling. Furthermore, a home equity loan requires monthly payments until the amount borrowed is repaid. An HECM doesn’t put another lien on your house, but a house with an HECM cannot be granted in an estate before the loan reverse mortgage is entirely paid. With a reverse mortgage, you’re expected to pay real estate taxes, utilities, and hazard and flood insurance premiums.
How Much Money Could You Get With an HECM?
The quantity of money you get is dependent upon multiple variables, making it impossible to ascertain how much you’ll receive for your dwelling. To begin with, it is dependent upon how much equity you have built in your property. Secondly, the age of the debtor is taken into consideration. Ultimately, the current interest rate determines how much money you may get together with your HECM. To find out more on home equity conversion mortgage, you may use the Department of Housing and Urban Development’s site to discover an FHA-approved creditor or to talk to an HECM counselor.