HECM, or Home Equity Conversion Mortgage, is a type of mortgage especially designed for seniors. It basically lets you borrow money against the amount of your equity. So if you need cash, this is one way to get the funds you need. Here are a few things you should know, though, before you go out and get one.
You need to be 62 years old or older to be eligible for this loan. Otherwise, you’ll have to wait it out or explore other financial options that might be available to you.
You should own your own home to be able to qualify. If you’re still paying off a house or property, make sure your mortgage balance is low enough that it can be easily paid off at closing, with the proceeds from the reverse loan going towards the payment of the remaining amount you owe.
You must have enough financial resources to cover the costs of ongoing charges on your property. This includes your monthly insurance premiums, homeowner’s dues, and taxes. Failure to keep up with your payments can compromise the mortgage agreement and render it null and void.
You’ll need to live in the home for the agreement to work. If you live out of the home for more than a year, then that, too, makes the loan agreement useless. So if you plan on living a few months of the year somewhere else, make sure those months don’t extend to more than a year. Otherwise, you could lose the advantages that an HECM brings to the table.
Make sure you pick the right HECM lender. Ask around and do your research in order to help you figure out which mortgage lending companies enjoy stellar reputations in the industry. Compare quotes and find yourself the best deal.