Photo courtest of Alex SegnePhoto courtesy of Flickr
My previous post covered the basics of a Reverse Mortgage. In today's post I would like to touch on the loan products and payment plans available today.
The most popular product is the HECM (Home equity conversion mortgage).
What is a HECM Plan?
A HECM Plan is a special type of Plan that enables Seniors to tap into the equity in their home and receive cash, a tax-free monthly income, and/or a line of credit, or combinations of these. There are no income, asset or credit qualifications and there are no monthly payments to make. The Plan is not repaid until the Seniors permanently leave their home. The bank does not own the home the senior does. Just like all mortgages, a lien is placed on the property but ownership continues with the senior. Reverse Mortgages are backed by the U.S. Government (HUD/FHA).
Today there is a fixed rate HECM loan! The rate is only 5.56%. This loan requires that the borrower take a lump sum at close of escrow.
So the questions is: How much money can I receive and how do I receive it?
The amount of money you receive from a HECM Plan is determined by the home value, the age of the homeowner(s) and the current interest rate from HUD. I can run a scenario for someone in a matter of minutes.
How Do I Receive My Money?
With a HECM Plan, the Senior has five (5) payment options to choose from:
(1) Lifetime Payment or tenure - Receive equal monthly payments for as long as the senior chooses to stay in the home
(2) Line of Credit - Money can be drawn at any time up to the amount of the available limit and interest is charges only on what is drawn.
(3) Lump Sum Cash Advance - This option allows the senior to draw all of the available funds at close of escrow which is usually done with the fixed rate product.
(4) Modified Tenure - A portion of the proceeds is set aside as a line of credit combined with fixed monthly payments.
(5) Term - Senior to receive equal monthly payments for a fixed period of time that they select. The Senior can use the proceeds from the Reverse Mortgage in any way they choose.
Stay tuned over the next few days for additional information! Please feel free to ask me any questions below or contact me directly.