Is a HECM mortgage the right move for me?

Active adults walking on the sea shore.

They are not for everyone.

FHA underwriting guidelines, mandate that you must be 62 years of age or more to be eligible to access the program.  You also must complete a counseling session provided by a HUD approved housing counselor. You must meet certain financial thresholds to assure that the program is suitable for your situation.

I'm required by FHA to ask you questions about your goals, long and short term, your home and living arrangements and your current and future finance options as I go through the evaluation process to try to determine the best options for you.

Usually it's a good idea to gather information and explore all of your home equity options early in the process so they can be thoroughly discussed with family, friends or advisers you trust.  And I encourage you to do so very early in the process.

I will provide you with a detailed proposal and financial display with more detail than you ever thought of or maybe need so that you will have the information needed to make a good, sound financial decision.  

If I feel that at any point in the process that a HECM mortgage is NOT the best option for you, I'LL TELL YOU SO and why. 

Here are a few areas to consider as you contemplate a HECM mortgage:


Do you need extra cash from your equity now or in the future?

Turning your homes on paper equity into liquid cash with a HECM mortgage is a big decision.  Most advisers in the past advised to hold off and save the equity for emergencies.  However, recent financial studies have shown that tapping your homes equity earlier and then delay accessing other retirement funds until a later time may be a better strategy for extending the life of your retirement assets and/or getting a larger monthly benefit when you do, from your social security for example.

The HECM mortgage line of credit option can be a great way of protecting future market value of your home in case of a downturn in the market and ensure that you will always have today's equity to draw upon.

Are you house rich, cash poor and on a fixed income?

Recent studies have shown that for most of us our largest source of personal wealth is the equity in our homes.  Many of us do not have any other sources of cash flow other than our social security checks.  A HECM mortgage set up to provide a certain monthly amount may just be the option that makes the most sense for you.

How long do you plan on living in your home?

MECM mortgages make more sense if you plan on living in your home and "Aging in Place".  At least 3 to 5 years at minimum seems to be the time frame to make the program financially sound given the costs associated with the loan.   FHA insurance, which assures that you will never owe more than the home is worth, that your loan can never be called due before you pass or move out, that your home can't be sold out from under you, or that your line of credit can't be frozen and all of the other benefits it covers, has a premium that is paid from the loan proceeds at closing as well as the other settlement charges make this a long term plan vs a short term solution.

Are you concerned about paying for maintenance, property taxes, hazard insurance and maybe HOA dues?

As we all know, property taxes must be paid or the county can take our homes for back taxes, one fire or natural disaster can wipe our our shelter and it isn't getting any cheaper to maintain our houses especially if we are on a fixed income.  Having a long term source of funds to pay for those expenses needs to be part of any retirement plan.  Is it part of yours?

Do you or your spouse want to keep living in the house when either passes?

This is a discussion I recommend and encourage early on.  If either wants to continue living in the home, will they be able to afford it.  Fortunately, FHA has built in some provisions for the spouse who is maybe under age 62 to allow them to live in the home without the loan coming due at the elder spouses passing.

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David A Weaver, NMLS #228406

Scottsdale, Arizona 85255, United States

Call Toll Free at 877-410-0783 x 4