10 Things You Should Know About a Reverse Mortgage / Home Equity Conversion Mortgage (HECM)
Ten important things to consider about a reverse mortgage / Home Equity Conversion Mortgage (HECM). Learn the facts from The Challis Team
1. Reverse mortgage/Home Equity Conversion Mortgage (HECM)s Have Consumer Protections
Government regulations require that all reverse mortgage/Home Equity Conversion Mortgage (HECM) lenders operate under the same guidelines. This assures borrowers that as long as they are using an approved lender and obtaining an FHA insured reverse mortgage/Home Equity Conversion Mortgage (HECM), the loan will have all the consumer protections required in this program.
2. Meet With Someone You Trust
It is of paramount importance that you understand the details of the program, as you will need to make some decisions along the way. Meeting with someone you know and trust will assure a smooth transaction, and you can feel confident that all your questions are being answered so that you can make informed, educated decisions.
3. Select an Experience Lender
We recommend that you select a lender whom you know and trust. Ideally, an experienced lender who can assure you the greatest depth of knowledge, and one whose expertise will make the program easy to understand and the process simple. You can be confident that Cherry Creek Mortgage Company has the best possible resources to assure your transaction is completed timely, accurately and professionally.
4. Listen to Experienced Professionals
While you should never feel you are being pressed to proceed before you are ready, you should also make sure the advice and guidance you are receiving about this program is from people who are knowledgeable about the facts of the program. Many well-meaning family members, friends and professionals may offer advice, but if their understanding about the program is not based on the facts, you may be misguided or make a wrong decision. Please feel free to use us as a resource to help you confirm any information you are getting about this program-regardless of the source.
5. Drawing Funds
A reverse mortgage/Home Equity Conversion Mortgage (HECM) gives you access to a portion of the equity in your home. You decide the amount of available funds to draw, and interest is assessed only against what you draw-when you draw it. Funds that you do not draw remain as equity in your home. When you draw funds, you are not required to make a monthly repayment of the equity or interest. When you or your heirs sell the home, the equity you drew and the interest that accrued will be deducted from the sale proceeds and all remaining profit from the sale is yours or your heirs.
6. All Costs and Fees are Fully Disclosed
All costs associated with your reverse mortgage/Home Equity Conversion Mortgage (HECM) must be disclosed to you in detail. All fees, including upfront fees and any recurring fees over the life of the reverse mortgage/Home Equity Conversion Mortgage (HECM), will be added to the final payoff. If you should ever desire to make a partial or full repayment of this loan, you may do so without penalty.
7. You have Discretion on Drawing Funds
Depending on the Loan Program you choose, you may have sole discretion as to how you draw your funds.
8. No Monthly Mortgage Payments
Unlike a traditional mortgage, you are not required to make a monthly mortgage payment on your loan as long as the loan requirements are met. Your requirements in this loan program are:
- At least one of the borrowers must occupy the home as their primary residence;
- You must keep your property taxes current;
- You must keep current and adequate homeowner’s insurance on your home (in the case of a condominium or townhouse, keep your HOA dues current); and,
- Perform whatever routine maintenance is necessary to keep your home in good repair so as to not lose eligibility for your homeowner’s insurance.
9. Not Solely Based on Credit Score or Income.
One of the most advantageous benefits of a Reverse Mortgage/Home Equity Conversion Mortgage (HECM) is that there are limited income and credit score requirements. Under the New Financial Assessment Rules you will need to demonstrate a capacity to continue paying taxes and insurance on the home.
10. Home Ownership:
With a Reverse mortgage/Home Equity Conversion Mortgage (HECM), you retain home ownership and the ability to live in your home. As such you are still required to keep up insurance, property taxes and maintenance for your home.