HECM 4 Purchase
A Radical Shift in Buying Power for Baby Boomers, using an FHA-HECM mortgage to purchase a home!
The first draft of this post began with a long description of the problems seniors face today, longevity, fixed income, limited liquid assets, and inflation. It defined the problems in great detail. Then it occurred to me that anyone reading this is doing so because they, or someone they care about is already intimately aware of the problems and are looking for a solution. There's really no need to explain longevity verses the need for cash.
We've had it all, and we still want it all. The problem is the world didn't follow our retirement income plan. The investment returns and longevity have changed a great deal for Boomers from 1946 to until today.
What is a Home Equity Conversion Mortgage (HECM)?
It' just a mortgage.
HECMs are mysterious for one simple fact, they are only available to seniors. One of the borrowers must be at least 62 or older. A large section of people in the market to buy a home are not eligible so they have no reason to investigate the subject. But seniors owe it to themselves to at least consider if a HECM is right for their financing needs. The benefits are very exciting for someone that is eligible, has cash or equity to work with and wants to downsize, move to a more suitable home, buy a more expensive home, or simple stop making payments on their current mortgage.
HECMs can be used to purchase a home or refinance an existing home.
There are a lot of misconceptions about how HECMs work, what they do and who is eligible to use one.
One important point: HECM's are non-recourse loans.
There is no personal liability to the borrower or their estate. (non-recourse means the home is the only asset securing the loan, not the borrower's other assets, savings, rental properties, etc. Regular mortgages have personal liability, all of the borrowers assets are at risk in the case of default except a few like retirement accounts for example) Every estate planner should be aware of this first and foremost. It is the only mortgage product that I can offer someone that is non-recourse. That's huge!
The second major attribute: There is no required monthly payment.
Interest accrues to the loan balance instead of being paid as part of the monthly payment - there is no monthly payment. The borrower may voluntary pay the interest and or principle if they want to, but it's not a requirement. The borrower can make payments on a HECM just like any other mortgage, and there's no pre-payment penalty. However, the FHA-HECM mortgage is designed to give the borrower more options to manage their discretionary cash flow during a long retirement. A retirement that often lasts 18 to 25 years. It's a great financial alternative for people on fixed incomes!
Here's a list of details specific to HECM:
BASIC POINTS
- Never have to make a mortgage payment
- At least one owner/borrower must be 62 or older
- Never give up title to the home
- Never owe more than the home is worth
- Never have to move
The Owner's Responsibilities
- Occupy the home as their principal residence
- Pay the real estate taxes
- Keep the home insured
- Normal maintenance and upkeep
For a free information booklet, message me on LinkedIn, or send an email to: [email protected]
Or call me direct (502) 753-4127
Here are some links to other articles that may be of interest:
Un-Conventional Financing for Self-Employed Buyers
Un-Conventional Financing for Un-Conventional Circumstances