Can You Afford a HECM?

Thanks for sharing this!

What’s a HECM? It’s a federally insured Home Equity Conversion Mortgage sponsored by the US Department of Housing and Urban Development through the Federal Housing Administration. You may know HECMs better as “reverse” mortgages, a way for you to get a tax-free cash advance from the equity in your home if you’re part of the over-62 crowd.

Money from a reverse mortgage can be used for almost any purpose. Even better, as long as the house remains your principal residence, you will not have to repay the loan. And, thanks to this year’s stimulus plan, the loan limit on HECMs was raised to $625,500. This temporary increase stays in effect until December 31, 2009 unless extended by Congress.

HECMs may sound like a good deal. But before you apply, be aware of the costs. You’ll have to pay some costs upfront, out of your savings. Others can be financed by the loan, but will decrease the amount of money you can get.

Here’s a partial list of what to expect.

  • Origination fees are payments to the lender to process your loan. The fees can be financed as part of your loan.
  • Closing costs include title search, title insurance, surveys, inspections, recording fees, mortgage taxes, credit checks and appraisals. Most closing costs can be financed with the loan.
  • Mortgage insurance protects both you and your lender and insures that your contract will be carried out as promised. The initial premium is financed through the loan, reducing the amount available to you. Monthly premiums are added to your loan balance.
  • Servicing fees are amounts your lender charges for services such as sending account statements and disbursing loan payments to you. Initial fees are deducted from available funds. The recurring monthly charge is added to your loan balance.
  • HECM counseling provides you with information about reverse mortgages and alternatives that may be more appropriate to your circumstances. Counseling can be free or low cost and is typically paid out of pocket by you.

You might also like these posts

Article – Preparing for Hurricane Season Image source: By Nilfanion , via Wikimedia Commons. The map shows the tracks of all tropical cyclones which formed worldwide from 1985 to 2005.The Atlantic hurricane season begins June 1. While the 2014 season is expected to be a mild one, mild doesn’t mean storm-free. Getting ready early is a good idea—and early preparati...
Article — Locked Out Image source: UK, public domain, via Wikimedia Commons What’s on your computer? Your manuscripts? Work? Photos? What would you do if you were denied access to those files—if you were locked out by rogue hackers? If you’re shaking your head because you think nothing on your computer is of value to hackers, consider th...
Article — Tax Identity Theft Awareness Week Image source: Taxes are scary enough, without adding tax identity theft to the mix. The costs—$3.6 billion a year according to an estimate by the US Treasury Inspector General for Tax Administration—are scary, too. Unfortunately, both tax ID theft and the costs are on the rise. The US Federal Trade Commission...
Article — Your 2013 Federal Income Tax Return Image source: Whether you’re a part- or full-time freelancer, receiving income means filing a tax return. Here are three things to keep in mind as you look back at your 2013 business activity. Dates: The IRS will begin accepting 2013 business returns on Monday, January 13, 2014. For individual returns, the da...

We write. Visit us in Carpenter Country, a magical place that, like our stories, is unreal but not untrue.

Posted in Articles Tagged with: ,