Homeowner Responsibilities and HECM: A Brief Guide
As you prepare for retirement, and start considering a reverse mortgage, also known as Home Equity Conversion Mortgage (HECM), there are some important things to remember.
While all HECM loans require a third-party counseling session with a government-approved housing counselor, understanding the obligations and responsibilities of homeowners from the outset can help with planning and long-term budgets.
To be eligible to access equity via a HECM, you must meet certain age requirements, own your home and it must be your primary place of residence.
The home is the security for the HECM, just as it is with traditional mortgages. Remember, you still own the home. You, the owner have a few simple requirements. You must keep the property taxes and required insurance on the home current.
Because you are making these payments directly, make sure to budget wisely, and take your annual tax obligations and insurance costs into account. Make sure to be your own best advocate by researching what property tax exemptions and reductions might be available to seniors in your state, county or area.
Enjoy your home at its fullest potential by keeping up with general maintenance, having major issues serviced as soon as possible. Maintenance will always remain the homeowner’s responsibility, regardless of a HECM.
And don’t forget those homeowners’ association or condo dues—whether you pay them yearly or monthly—they’re still coming directly from you.
It is generally in your best interest to have both spouses included on a HECM when possible. In that case, if one spouse passes, it has no impact on the HECM. If both spouses are not on the HECM, when the HECM borrower passes away, the HECM does not transfer to the surviving spouse. There are specific provisions that will defer repayment of the HECM and allow the non-borrowing spouse to remain in the home. Be sure you have talked to your lender and reviewed the specific rules and conditions.
Additionally, when looking into long-term budgets and planning, make sure you have chosen the best HECM option for you. There are several ways the HECM proceeds can be received. You can receive monthly checks for a specific term that you determine; for as long as you live in the home; or you could have a line of credit; you can also receive a lump sum or a combination of the above.
To find out if a HECM is right for you or your loved ones, contact Open Mortgage today to discuss the future.
Things to know about Reverse Mortgages:
- At the conclusion of a reverse mortgage, the borrower must repay the loan and may have to sell the home or repay the loan from other proceeds
- Charges will be assessed with the loan, including an origination fee, closing costs, mortgage insurance premiums and servicing fees
- The loan balance grows over time and interest is charged on the outstanding balance
- The borrower remains responsible for property taxes, hazard insurance and home maintenance, and failure to pay these amounts may result in the loss of the home
- Interest on a reverse mortgage is not tax-deductible until the borrower makes partial or full re-payment
Are the charges assessed with the loan payable at closing or can they be rolled into the loan balance? How does the fact that my husband is a Veteran help or hurt us in getting a reverse mortgage? We are both listed on the title of the home in a Trust does that have to be changed to husband and wife status?
How big a part does your credit rating have on being approved?
P.S. We are both 69yrs old.