I get asked this question all the time by my clients. A Home Equity Conversion Mortgage (HECM)* loan allows homeowners who are 62 years or older to borrow against the value of their house.
I often remind my clients that there is no repayment of the mortgage (principal or interest), other than a few specific situations.
Here are those situations:
- If you have not lived in the house for 12 continuous months the HECM loan amount is due. (If there is a co-borrower, that person can continue to live in the house – and the loan will not need to be repaid at that time – even if you pass away or move out.)
- When the last owner on the title has passed away or leaves the home permanently.
A key requirement of a HECM loan is that you live in the house as your main residence. When it is not and you are the only borrower, then the loan is due.
Each calendar year, the borrower is required to certify in writing that the house is their main residence.
If you’re at an age where you’re thinking about retirement, a HECM loan could be a good idea to consider. That is because there is no monthly mortgage payment, which helps you get the most out of your money and helps protect your kids’ future. In addition, a HECM loan does not have an impact on property taxes, Social Security, homeowner’s insurance or Medicare.
To get more information about a HECM and other loans click here.
*(1) at the conclusion of a reverse mortgage, the borrower must repay the loan and may have to sell the home or repay the loan from other proceeds; (2) charges will be assessed with the loan, including an origination fee, closing costs, mortgage insurance premiums and servicing fees; (3) the loan balance grows over time and interest is charged on the outstanding balance; (4) the borrower remains responsible for property taxes, hazard insurance and home maintenance, and failure to pay these amounts may result in the loss of the home; and (5) interest on a reverse mortgage is not tax-deductible until the borrower makes partial or full re-payment.