Older couple on motorcycle

A Home Equity Conversion Mortgage (HECM) is a well-established tool for retirement-age homeowners looking to add more financial flexibility into their future. These loans, often referred to as a reverse mortgage, offer a way to capitalize on a home’s equity without having to part with the property.

The eligibility requirements for a HECM include a minimum age of 62. In addition, the property used to obtain the reverse mortgage must remain your primary residence. Taxes and insurance also need to be kept current, and proper maintenance on the home must continue. However, the funds from a HECM can be used as you see fit and can even support plans to make travel a central part of your retirement.

Added Income

If improving pandemic conditions and Covid-19 vaccines have travel moving back up your list of retirement priorities, a reverse mortgage can undoubtedly play a role. Its impact will be determined by the amount of equity in your house and your age, of course. You cannot borrow all of your home’s value, but the percentage available is higher for older borrowers.

Funds are available as a lump sum, monthly disbursements, or as a line of credit. Any of these HECM options can provide added security when it comes to travel costs. The simplest way is to use the added income to subsidize plans that a more restrictive retirement budget would otherwise limit. Splurging on an annual vacation or crossing off a bucket-list destination may seem less risky with additional cash at your disposal.

Remember, the funds do have to be repaid eventually. Therefore, it’s essential to have a plan to make the most of the loan. In fact, part of the transaction includes financial counseling to be sure you understand the requirements and the repayment option. Consider speaking with your financial advisor for additional planning help.

Second Home

Beyond the occasional trip, a reverse mortgage could also be the path to a more significant change to your retirement lifestyle. In some cases, your accessible home equity might make purchasing a second home a realistic option. Using the proceeds from a reverse mortgage to aid in buying a vacation home can be a strategic decision for retirees who want to split time between two places.

The primary residency requirement will still apply to the home used to originate the HECM, so be sure you have a clear understanding of how your lender determines residency. A HECM for Purchase could also be available if you wish to make the new residence your primary one yet maintain another home elsewhere.

Other Options

Of course, the ways to utilize a reverse mortgage in your travel goals are limited mostly by your creativity. Trailers and recreational vehicles, boats, vacation clubs, or even a resort-style backyard oasis are possibilities with the help of a HECM. Check back in a few weeks for more details on taking your retirement on the road.

Find out how a reverse mortgage can open new doors for your retirement on our website. Or call today to speak with an Open Mortgage loan officer about your lending options.

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
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