How Homeowners Can Thrive in Retirement

Let your home take care of you

Are you a homeowner nearing retirement age and wondering how you'll pay for your expenses without depleting your savings or selling your home? If so, there's a financial product that can help you out – the Home Equity Conversion Mortgage (HECM). Simply put, a HECM is a home equity loan. Better known as a type of reverse mortgage that lets you convert a portion of your home equity into cash without having to give up your home, take on a new mortgage payment, or hand over any future equity to a third party - it's your home and your equity. If you are currently making monthly mortgage payments, this loan on the home equity that you’ve built up, will cover those payments as well. This means that you won’t have to make a monthly mortgage payment for the rest of the time that you live in the house.

The Federal Housing Administration (FHA) backs the loan, and it is repaid when the borrower or the last surviving spouse moves out of the home or passes away.

To qualify for a HECM, you need to own your home outright or have a low mortgage balance that can be paid off with the loan proceeds. Once you receive the loan, you can access the money in a few different ways, like taking a lump sum payment, setting up a line of credit, or receiving monthly payments.

One of the best things about a HECM is that you don't have to make monthly mortgage payments while you're living in your home. This can give you some financial breathing room and reduce your stress levels. When the loan is due, it's repaid by selling the home or using other assets, like savings or life insurance, to pay off the debt. Any leftover equity goes to you or your heirs. If for some reason the loan amount is more than the house is worth, the FHA insurance (required on all HECM loans) will cover the remaining difference. This is a protection that guarantees that neither the borrower nor their heirs are responsible to pay out of their pocket to cover the remaining cost of the loan.

So, what are the benefits of a HECM? First off, you get tax-free cash that you can use for living expenses, healthcare costs, travel, or anything else you need. The personal line of credit grows at the current loan interest rate plus .5%, and this home equity line of credit type loan can never be turned off. It is always available to you when you need it. On top of the availability of accessing your money, you also get a non-recourse loan, which means that you or your heirs are not personally liable for any shortfall if the loan balance becomes higher than the value of the home. Even the best HELOC rates can’t compete with this feature.

Another great benefit is that a HECM can help you delay taking Social Security benefits until a later age, when your monthly benefit amount will be higher. You can also use the funds to cover healthcare-related expenses, such as medical bills or long-term care costs.

In short, a HECM can be an excellent financial product for seniors who want to access the equity in their homes and improve their financial situation. With no monthly mortgage payments and tax-free cash, a HECM can provide a source of financial stability and peace of mind in retirement.

Stephen Wright and Trevor Wright are certified loan originators in Idaho. We specialize in helping seniors open a reverse mortgage in Idaho, Washington, and Oregon by helping them to safely access their home equity. We are very hands on, attentive to your needs, and strive to leave you better off than when you came to us. Please reach out to us below to schedule a no-obligation meeting. We look forward to making your retirement dreams a reality.