HUD explains the top 10 things homeowners should know about HECMs before applying for one at tulsaworld.com/HECM
HECMs are more costly than other home loans, and their up-front costs can be high. They are generally most expensive when you don't stay long in your home. They are widely available, have no income or medical requirements, and their cash advances can be used for any purpose - from medical bills to retirement income.
Applicants must meet with counselors from an independent government-approved housing counseling agency who explain the costs, financial implications and alternatives. Counselors tell applicants about government or nonprofit programs for which they may qualify, and about any single-purpose or proprietary reverse mortgages available in the applicant's area that might be cheaper than HECMs.
The amount of money you can borrow with an HECM or proprietary reverse mortgage depends on your age, the type of reverse mortgage you select, the appraised value of your home, current interest rates and where you live. In general, the older you are, the more valuable your home and the less you owe on it, the more money you can get.
With HECMs, you can select fixed monthly cash advances for a specific period or for as long as you live in your home. Or you can opt for a line of credit, which allows you to draw on the loan proceeds at any time in amounts that you choose. You also can get a combination of monthly payments plus a line of credit.
HECMs generally provide larger loan advances at lower costs compared to proprietary loans. But owners of higher-valued homes may get bigger loan advances from a proprietary reverse mortgage. That is, if you have a higher appraised value without a large mortgage, you may qualify for greater funds. Location (for example, your neighborhood) is only one part of the determination of appraised value. In the HECM program, a borrower can live in a nursing home or other medical facility for up to 12 months before the loan becomes due and payable.
Reverse mortgage loan advances are not taxable and generally do not affect Social Security or Medicare benefits. You retain the title to your home and do not have to make monthly repayments. The loan must be repaid when the last surviving borrower dies, sells the home or no longer lives in the home as a principal residence.
Download a copy of the National Council on Aging's 24-page booklet "Use your home to stay home" at tulsaworld.com/NCAStayHome or order it by calling the NCA at 800-510-0301.
Original Print Headline: Reverse mortgage basics
Tulsa World consumer writer Phil Mulkins wants to know which topics interest you. Call 918-699-8888, email your suggestion to phil.mulkins@tulsaworld.com or mail it to Tulsa World Consumer, PO Box 1770, Tulsa, OK 74102-1770.
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