Understanding Reverse Mortgages
The Home Equity Conversion Mortgage (HECM) is a reverse mortgage that has rapidly become part of the financial planning world.
No longer considered a loan of last resort, the new and improved HECM could help senior homeowners or buyers who may not necessarily need cash now but wish to secure the longevity of their savings. It is also a suitable option for seniors looking for a new home while utilizing their existing home equity.
HECM for Purchase
If you or your spouse is at least 62 years old, you may be able to take advantage of a Home Equity Conversion Mortgage for Purchase, or H4P for short. The H4P allows you to purchase a new home with 50% down, reduce your out-of-pocket expenses by not having a monthly mortgage payment, and retain more of your life savings. The basics of HECM for purchasing include:
- You must intend to occupy the property as your primary residence.
- Down payment funds must come from your checking, savings, investments, gifts, or an existing home sale.
- You must be able to maintain the home and pay property tax plus insurance and HOA dues.
- A financial assessment is required.
HECM for Refinance
HECM for refinancing can be an effective way for seniors 62 years and older to supplement expenses or prepare for unexpected costs, like medical bills. In this case, the home must be your primary residence and you must have approximately 50% equity in your home. The title of the home remains with the borrower, and there is no personal liability to repay the loan. The loan is paid back only by selling or refinancing the home.
Is a Reverse Mortgage Right for Me?
A reverse mortgage is the right decision for senior homeowners and buyers in a number of situations. If you need extra money for retirement or are struggling to make your mortgage payments but do not want to move, applying for a reverse mortgage can help.
There are also situations where one spouse unexpectedly passes away, and a reverse mortgage offers the surviving spouse a solution for keeping their home. You might also own your home free and clear (meaning you have paid off your mortgage), but you need cash.
Our mortgage team can review your situation and help you determine how best to proceed based on your goals.
Partner with Traditions Bank
As a local community financial institution, Traditions Bank prides itself on getting to know our customers well, understanding their needs, and delivering the right products. If you are interested in learning more about your reverse mortgage options, we are here to help. Schedule a call with our reverse mortgage experts today.
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