Q: What is a Home Equity Conversion Mortgage (HECM)?
A: A HECM loan allows homeowners who are 62 years of age or older to borrow money by tapping into the equity that exists in their home.
Q: Are there restrictions that dictate how a HECM borrower can use their loan proceeds?
A: The proceeds are not only non-taxable but can be used for any purpose, such as supplemental retirement income, funding home modifications to better age in place, delay social security benefits, pay off debt, or act as an emergency fund.
Q: It seems that only people who are struggling financially take out a HECM, is that true?
A: It is not a last resort. More and more HECM’s are being utilized to diversify investment strategies and can help seniors enhance their quality of life in retirement.
Q: If you chose a HCEM loan, does the bank then own the home?
A: No, you retain ownership of your home and will not relinquish the title. Instead, you are borrowing against the home.
Q: When a borrower takes out a HECM, will they lose their Social Security and Medicare benefits?
A: No, Social Security and Medicare benefits are generally unaffected by a HECM. Medicaid, a need-based program can be, so work with a qualified financial adviser to determine how much you can take from HECM funds each month to remain within the Medicaid limits.
Q: Can children or heirs keep the home with a HECM Loan?
A: Just like a regular mortgage, they can keep the home by acquiring their own financing to pay off the outstanding mortgage upon their family member's death. Unlike a traditional mortgage, a HECM is a non-recourse loan, meaning that you or your heirs will never owe more than the value of the home.
Q: How much are the monthly payments?
A: A HECM loan has a deferred repayment, making monthly payments optional. The loan only becomes due and payable when you pass, sell your home, move or you can no longer meet the loan terms (including payment of property taxes, insurance, or property upkeep).
Local Expert, Rebecca Porter with One Trust Home Loans, answers our questions about Home Equity Conversion Mortgage (HECM). Rebecca calls Snohomish "home" and has a passion for educating seniors and their families as they begin to navigate their golden years.
