Home Equity Conversion Mortgage?
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Call Us To See How Much You Qualify For On A Home Equity Conversion Mortgage (HECM). We Will Provide You With A Complete Free No Obligation Breakdown On How Much You Qualify For Using
Western Pacific Home Loans - Home Equity Conversion Mortgage (HECM)
Call Us To See How Much You Qualify For On A Home Equity Conversion Mortgage(HECM). We Will Provide You With A Complete Free No Obligation Breakdown.
What is a Home Equity Conversion Mortgage?
Is a type of Federal Housing Administration (FHA) insured reverse mortgage. Home equity conversion mortgages allow seniors to convert the equity in their home to cash.
The amount that may be borrowed is based on the appraised value of the home (subject to FHA limits), and the age of the borrower (borrowers must be at least 62 years old). Money is advanced against the value of the equity in the home.
Interest accrues on the outstanding loan balance, but no payments must be made until the home is sold or the borrower(s) die, at which point the loan must be repaid entirely.
The Federal Housing Administration sponsors the home equity conversion mortgage and provides insurance on the products. The FHA also sets the guidelines and eligibility for these loans. Borrowers can only obtain HECMs from banks where the FHA sponsors the product.
To obtain a home equity conversion mortgage a borrower must complete a standard application providing required information.
To obtain approval a borrower must meet all of the product’s requirements. Requirements will be based on the borrower’s profile, their financial situation and the collateral value of the property. A borrower must be 62 years old with a qualifying property that has been substantially paid off with significant equity available.
While HECM loans do not require borrowers to make monthly payments certain fees are associated with the loan closing and servicing of the loan.
- Income, assets, monthly living expenses, and credit history will be verified.
- Timely payment of real estate taxes, hazard and flood insurance premiums will be verified
For adjustable interest rate mortgages, you can select one of the following payment plans:
- Tenure - equal monthly payments as long as at least one borrower lives and continues to occupy the property as a principal residence.
- Term - equal monthly payments for a fixed period of months selected.
- Line of Credit - unscheduled payments or in installments, at times and in an amount of your choosing until the line of credit is exhausted.
- Modified Tenure - combination of line of credit and scheduled monthly payments for as long as you remain in the home.
- Modified Term - combination of line of credit plus monthly payments for a fixed period of months selected by the borrower.
Pros and Cons of a Reverse Mortgage
Does not require monthly payments from the borrower.
Proceeds can be used to pay off debt or settle unexpected expenses.
The money can pay off the existing mortgage.
Funds can improve monthly cash flow.
Non-borrowing spouses not listed on the mortgage can remain in the home after the borrower dies.
Fees and other closing costs can be high.
Borrower must maintain the house and pay property taxes and homeowners insurance.
A reverse mortgage drains a key asset of your estate.
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