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What is a Hecm Reverse Mortgage?


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When the borrower lives in a home that is not his he may be eligible for reverse mortgage benefits. There are different types of reverse mortgages and the most familiar is the home equity conversion mortgage. A reverse mortgage is one that pays off the existing loan, but with the addition of an interest free, tax deferred amount to the borrower’s monthly income. Unlike a conventional home equity loan, the interest on this loan does not accrue; however, it can be withdrawn at any time. Usually, the lender will agree to allow this type of withdrawal if the current loan or mortgages are coming due within a specified period of time.

As more seniors are choosing to move into their homes rather than stay in senior communities, more senior citizens are approaching hecm lines. These are financial institutions that specialize in issuing hecm lines. An hecm line essentially provides a way for seniors to convert their financial security into cash that they can use to purchase real estate. Seniors who have an interest in obtaining a reverse mortgage lump sum payment should be aware that they must be residents of the United States in order to qualify. In addition, the lump sum must be paid within a specified period of time.

Reverse mortgages are often secured by home equity loans. In order to obtain either a fixed rate or a adjustable rate loan, a borrower must sign a loan agreement. Typically, these types of mortgages will pay the senior approximately two to three times the amount of the loan. The monthly payment will depend upon the equity that is in the home and the senior’s age at the time of application.


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Many seniors decide to convert their reverse mortgages into a Line of Credit. This allows them the flexibility to change their monthly payments. Instead of receiving fixed monthly payments, the borrowers may choose to make weekly, bi-weekly, or monthly payments. Monthly payments allow the senior to budget money for unexpected costs. If a borrower has unexpected medical expenses, medical bills, or other unplanned costs, they will not have the money available to make these payments. A Line of Credit will allow these individuals to make the necessary payments in advance and will result in reduced financial stress.


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Another way to convert a reverse mortgage to a Line of Credit is to contact your lender. Most lenders can easily change existing reverse mortgages to Line of Credits. In many cases, hecm lines of credit will require no fees or cost of any kind. However, there may be additional fees that would affect a individuals’ ability to repay the loan. These fees will vary between different lenders.

A hecm saver is another option that may be able to be used with a reverse mortgage. This strategy requires that the borrower choose a longer tenure for the loan. For example, a ten year term will usually provide the borrower with lower monthly payments over the life of the loan. The longer the tenure, the less amount of interest that will be paid over time. This strategy may not work well for borrowers who already have a large amount of equity in the home.

A hecm reverse mortgage may also be used to pay for short-term expenses such as automobile repairs or house cleaning. These loans do not generally require that the loan be repaid until the borrower dies, moves out of the property, or sells the home. These loans can be useful if a borrower does not need the cash upfront and simply needs money to cover an upcoming expense. However, they should be carefully considered before being approved because the interest on this type of loan may be relatively high.

A hecm reverse mortgage can be helpful for many seniors when appropriate, but should be carefully considered before a homeowner completely agrees to the loan. There are many advantages to using a forward mortgage instead of a reverse mortgage, but these mortgages also have various risks and benefits that need to be weighed carefully. When deciding whether to use a hecm reverse mortgage or a conventional loan for any reason, borrowers should consult a financial consultant to learn more about both options and get expert advice on how best to make the decision that’s best for them.