Reverse mortgages offer many ways to help financially-strapped homeowners find a way out of their financial woes. For seniors, Home Equity Conversion Mortgage, or HECMs, are an ideal financial product. Here’s what you need to know to see if HECMs can help you.
Only those aged 62 and above can qualify for the mortgage. If you don’t meet the age requirement, you’ll have to find some other means of coming up with funds.
Your Reverse Mortgage Type
While there are three types available—single-purpose, proprietary and HECMs—the third choice is specially designed to help seniors who find it challenging to make ends meet. Your mortgage type, though, also affects the amount of the funds you can borrow. Single-purpose ones offer smaller payments compared to what you can get with a proprietary or HECM loan. However, the last two (proprietary and HECMs) also typically cost more than the first one.
Your Property’s Appraised Value
The value of your home also determines the amount you can borrow, as explained by the Federal Trade Commission. In an HECM loan, you can’t borrow anything higher or beyond the appraised value of your property. That way, if your family decides to keep the property rather than sell it off, they only need to pay for the appraised value.
Current Interest Rates
Interest rates depend a huge deal on the market. So, if you go with variable rates, you can expect those interests to go up every month. However, if you opt for a fixed rate—only available through an HECM loan—while you save up on possible interest spikes, you get less than what you normally can receive from a variable loan type.
You’ve paid a lot to get the home you wanted. So make sure you shop around for the best fit. Consult with reverse mortgage specialists to find out if this is a financially sound or unwise option for you.