HECM is the abbreviation for Home Equity Conversion Mortgage, a special program that is specifically tailored to give clients an opportunity to withdraw some of the equity in their property. One of the highlights of this program is that it gives American senior citizens a golden chance to become financially stable, as they are able to use it to cover unexpected medical expenses, carry out renovations, and supplement social security. Here are some of the facts that one should know about the program.
What Does This Plan Entail?
As mentioned, HECM is a unique type of mortgage that gives one a chance to convert a portion of the current property equity into liquid cash. It is important to note that this equity accumulates over the years as long as the client is making the stipulated monthly mortgage payments or premiums.
What Are the Qualification Requirements?
To benefit from this program, one needs to be aged 62 or more, be the legal owner of the home, have a low mortgage balance that can be cleared at the closing of the proceeds received from this type of loan, and have enough financial capability to pay the ongoing local government property charges such as insurance and taxes. It is also important to note that the applicant must be currently living in the house used in the mortgage.
Can Clients Benefit Who Did Not Purchase Their Current Properties Using This Plan?
This is one of the most common questions that people ask regarding HECM. People who purchased their current properties through other mortgage programs can still benefit from this arrangement.
What Types of Real Estate Are Eligible?
According to current regulations, single-family homes and 2-3 unit houses with one unit occupied by a borrower are eligible for this program. In addition, the modern manufactured structures such as HUD-accredited condominiums can benefit from this plan, provided they meet the stipulated FHA requirements.
What Is the Difference Between HECM and Home Equity Loans?
These equity loans attract monthly payments or premiums on the interest and principal amount. On the other hand, an HECM reverse mortgage has no interest payments or monthly principal premiums. Instead, clients are required to pay flood and hazard insurance premiums, real estate taxes, and utility bills on time.
Can the Estate Be Transferred to Heirs?
Before the transfer process is initiated, all the interest, cash, and other finance charges that are indicated in the agreement should be repaid. The remaining proceeds can be transferred to a spouse or heirs. This means that no debt will be transferred to the heirs or estate.
How Much Money Can Be Acquired?
The amount varies from one borrower to another due to three main factors that are taken into consideration during the review process. The interest rate is one of the primary factors that determine the total amount of money that one will get from the property in the long run.
The Home Equity Conversion Mortgage is one of the best mortgage programs that you can use to get your dream house. Make sure that you understand all the details before making any moves to avoid regrets down the road. You can also consult a professional to make a more informed decision.