With life expectancy trending upwards, many older Americans today face financial hardship due to outliving their retirement savings. Living off a fixed income adds an extra layer of complexity, making it a difficult task to keep up with an increasing cost-of-living and elevated healthcare costs. For this reason, many seniors have found relief through the Home Equity Conversion Mortgage (HECM), also known as the reverse mortgage.
One Reverse Mortgage offers three main HECM products tailored to meet specific financial goals.
- Adjustable Rate HECM – This loan can give you the opportunity to open up some wiggle room in your financial budget and give you more financial flexibility. You can receive your proceeds from this product in the form of a line of credit, lump sum, monthly distributions, or any combination of the three.Notably, if you choose the line of credit option, it is not required to take out any funds when you start the line of credit – unlike with a traditional line of credit. In addition, because your proceeds have the potential to grow, the available funds in the line of credit increase over time. For example, if you don’t need immediate financial assistance, it can be beneficial to wait as long as possible to withdraw from your line of credit and maximize the value of your reverse mortgage. Idyllically, the line of credit can also create a safety net for medical expenses, unexpected costs, and home repairs down the road. However, if you’re financial security isn’t as strong, this product works as a great solution to give you peace of mind. It can also help delay the use of other retirement investments, which can give them more time to grow.
- Fixed Rate HECM – With this particular loan option, you receive one lump sum of money locked in at one interest rate, determined at the time of closing. This rate remains the same for the duration of the loan term. The funds collected from this product are typically used to pay off mortgage balances, property liens, medical bills, home repairs, and other living expenses so you can live comfortably in your own home.
- HECM for Purchase – Not only do you have the ability to get a reverse mortgage on your current property, but you can sell your home and buy a new one with a reverse mortgage. By purchasing a new home, you are able to live in closer proximity to your family, live in a warmer climate, or live in a home that matches your physical needs. When you purchase the home with a reverse mortgage, you won’t be required to make monthly payments on the new home and repayment of the loan doesn’t start unless you move, you sell the property, or you pass away.
For each type of reverse mortgage loan, the responsibilities remain the same. As the owner of the home, you are still responsible for paying insurance fees, property taxes, and home maintenance costs.