What the heck is a HECM?

2019-10-16 09:39:19
A HECM, or Home Equity Conversion Mortgage for purchase, may help you buy your next home without required monthly mortgage payments. Sound too good to be true? It’s not. A HECM for purchase is a reverse mortgage insured by the Federal Housing Administration (FHA). That means it’s the only one insured by the U.S. Federal Government. It was introduced by the FHA in 2009.

Who is eligible?
* Youngest borrower must be at least age 62.
* Occupy the property as a primary residence.
* Not be delinquent on any federal debt.
* Have the ability to pay for ongoing charges like taxes and insurance, HOA fees, etc.
* Participate in a counseling session with a HUD-certified HECM counselor.

How can this program help you?
It allows you to use the equity from the previous sale of your home and purchase a new one, using the HECM for purchase. The great part is the amount you’ll need to close typically ranges from 47% to 65% of the purchase price, depending on your age and other factors, including interest rates. Then you pocket the rest, potentially allowing you to use the cash for additional savings or retirement. You are not required to make any mortgage payments after you close.

Think about that. If eligible, then you can buy your next home- paying a fraction of the purchase price. You own the home, make NO mortgage payments, maintain ALL the rights of home ownership, and preserve capital.

What types of properties can I purchase?
* Single-family residence
* Planned Unit Development
* FHA-approved manufactured home
* FHA-approved condo.

Will my children lose their inheritance if I take out a HECM?
Your heirs will not be responsible for any debt because this is a non-recourse loan. If there is equity in the home then your heirs are entitled to the equity after they sell the home and pay off the HECM balance.

Will my surviving spouse lose the home?
As long as he/she is on the HECM loan as a co-borrower or qualified non-borrowing spouse they may live in the home as their primary residence for the remainder of their life.

Keep in mind HECM’s are not available in every state. They are available in North Carolina. Rules are many and can change. I recommend you speak with a HECM lender, attorney and tax advisor before jumping head-first into this program. I’m not any of the above!

A HECM for purchase may be something you did not know existed or misunderstood. My hope is now you can take this concept and see if it’s right for you, and determine if it has a part to play in your retirement plan.

To learn more, get on my calendar for a consultation here.

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