One of the very first reverse mortgage programs was created by the FHA or Federal Housing Administration. The Home Equity Conversion Mortgage or HECM is the program that was created by the FHA in 1989. This program allows homeowners to take out some of the equity they have built up in their homes. The FHA views this program as something safe for seniors to have greater financial flexibility and security.
The reverse mortgage loan option can be used by older Americans in order to pay medical bills, supplement social security, perhaps make some home improvements, or even pay off the portion they may still owe on their current mortgage loan. This is a viable option that is being chosen by more and more seniors who have seen their savings dwindling and who are looking at the specter of financial problems, whether imminently or down the line.
The idea is simple enough in that you can convert part of your home equity into cash through a reverse mortgage loan such as HECM. You have always kept up with your mortgage payments, and that means that equity has been building in your home over the years. You can now receive part of the equity that you have so consistently built up through some type of payment program.
If you take out a reverse mortgage on a home, you must make it your primary residence. However, depending on how much equity you have built up, you may have enough money on hand to pay the difference between what you will receive from the reverse mortgage and the sales price and closing costs of getting into a new property. Therefore, you may be able to get into a new home altogether, but you must still make it your primary residence.
You will be limited on the amount that you can borrow by your age, interest rates at the present time, your home's appraisal value, or whatever FHA mortgage limits there may be in your area, whichever amount is less. However, if you decide to take out a reverse mortgage, the loan will not be due if you live in the house and make it your main residence. This means that you will no longer have to make monthly mortgage payments, and you can concentrate on enjoying your retirement a bit more.
Do not get the wrong idea and think that you do not have make any payments because you still have to pay insurance, real estate taxes, your water bill, your electric bill and any other utilities. However, your home cannot be foreclosed when you have a reverse mortgage such as an HECM. In addition, you cannot be compelled to vacate your home since there are no mortgage payments to keep up with.
You can find lots of information about reverse mortgages online, and one of the requirements is that you must be 62 or older. If you are at least 62, and you are thinking about this type of loan, contact HUD or the AARP, and you are sure to get lots of valuable information regarding this type of mortgage option.
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