As people draw closer to retirement, many begin to plan how they will support themselves after they leave the workforce one last time. Retirement plans and Social Security are two commonly used programs. However, some people may find they need supplemental income for some expenses. Others may want to delay drawing from their plans or Social Security until a later time, and wonder how they can bridge the gap between retirement and turning to these accounts.
What is a HECM?
One answer to both of these common issues is a home equity conversion mortgage. A HECM, or a reverse mortgage, is a product that provides older homeowners 62 years old or older access to a portion of their home equity they have accumulated over the years. The amount of money they qualify for is based on many factors such as age, appraised home value, interest rate and equity in the home.
The HECM program was created through the Federal Housing Administration, which began in 1989. A new program known as HECM for Purchase was added in 2009, which gives seniors the ability to use their home equity to buy a new or a second home to downsize, move closer to family or move into a house more suited for their needs.
According to numbers collected by the U.S. Department of Housing and Urban Development through September, 2012, HECMs began growing more popular in the years after the program began. HECMs reached a high point in 2009, when more than 114,000 loans were originated. Reverse Mortgage Daily explained 2015 saw some changes to the rules that drew more people to the program. In 2015, HECMs brought in more than $7.9 billion, according to a report from HUD.
These changes included protection granted to non-borrowing spouses who wish to remain in the home after their spouse dies. This has been an issue in some cases, as the HECM is available to the borrower as long as he or she resides in the home. The loan must be paid once the borrower no longer lives in the home permanently.
The federal government recently decided that non-borrowing spouses may remain in their homes for a certain “deferral period” even after the death of their spouses, so long as they continue to meet the requirements of the loan and the lender agrees to it.
How to use a HECM
In 2016, reverse mortgages are expected to continue to grow. A HECM can be used in many ways, including funding a home improvement project to make your house more accessible, paying for a second home or delaying Social Security or retirement plan withdrawal.
HECMs can also be used as financial gifts, the National Reverse Mortgage Lenders Association said. Seniors can use them to aid their children or grandchildren with college tuition or professional development ventures. Or, if your child has a family emergency, the funds from a HECM can be used to help out financially.
For other seniors, a HECM can be used to pay for transportation arrangements to get to social activities, health appointments and other outings. Many seniors eventually decide to stop driving themselves to their appointments and other meetings. Sometimes they no longer feel comfortable driving or lose the ability to safely drive. Other times, they just want to cut down on car-related expenses.
However you decide to use your HECM, you can feel confident that millions of older homeowners have taken advantage of a reverse mortgage and are now enjoying financial peace of mind.
For more information about a HECM reverse mortgage and how much you may qualify for, contact Lenox/WesLend Financial or call 844-225-3669. As heard on the radio, it’s the biggest no-brainer in the history of mankind.