A reverse loan is a type of financial tool that has been around since the 60s. The most common type is the Home Equity Conversion Mortgage loan, or HECM. Federally insured, these mortgages are designed to offer seniors a lending hand during the lean, retirement years.
Basics
If you’re 62 years of age and older, you could qualify for an HECM loan if your home equity is big enough. That or plan to buy one with the proceeds from the loan. The home must also be your primary residence.
Not sure if your property qualifies? So long as it’s a two- or four-family structure, fit for the needs of a single family, in a condo building that’s been preapproved by the FHA, or in a manufactured home and you’re good to go.
However, if you’re still paying off your mortgage, make sure the balance due is almost little to none so that the proceeds of the loan are enough to pay it all off.
Benefits
Here are a few of the benefits you can look forward to with an HECM loan:
•No credit checks. You can qualify for a home regardless of your credit standing. This is a tremendous relief for seniors living on social security benefits.
•It doesn’t affect your social security and medical coverage. You can keep receiving your medical coverage and social security benefits without fail.
•You won’t have to worry about monthly payments to the lender. There would be none.
•You don’t have to pay off anything so long as conditions are met.
•Boost your monthly cash flow.
Limitations
Your loan amount is determined and limited by several factors. These include your age or the age of your spouse, in case the loan is co-authored or signed by a couple. The value of your home, current market interest rates and any FHA limitations that apply are also considered.
