How HELO Works
Although the HELO offers many unique benefits in comparison to a standard FHA reverse mortgage, it still functions in a similar way:
- You will remain the owner of your home.
- You can make payments if you wish, but there are no required monthly payments.
- If you decide not to make monthly mortgage payments, interest for those months will be added to the loan balance.
- You must still maintain the property, pay homeowners insurance, and property taxes to avoid foreclosure.
- The reverse mortgage will come due if you vacate the home, sell the home, or pass away.
The HELO in Action
Meet Tim and Ashley, two 68-year-old homeowners who purchased a seaside cottage in the Bay Area years ago. With its solar panels and high value, their home wasn’t a candidate for a FHA reverse mortgage. But, the situation has changed over the years. Now, their little bungalow has ballooned in value to reach $1,800,000. Based on their age and other factors, Tim and Ashley learn that they are eligible to receive $648,000 if they get a HELO with a fixed rate of 6.625%.
After paying off closing costs and an existing mortgage of $80,500, they receive $564,000 in funds to use as they wish. From the moment of closing, they gain access to a larger portion of their home equity than they could with a standard FHA reverse mortgage. Plus, they are able to walk away with over half a million dollars of their home equity even after paying off their existing mortgage and closing costs. Tim and Ashley’s story demonstrates the remarkable potential of HELO; nowadays, accessing a greater portion of your home’s equity is easier than ever.
*Sample hypothetical scenario is for our HELO reverse mortgage and is based on the 10-Year LIBOR swap index as of 9-7-2018. The index can change at any time. APR is 6.326%. Results may vary.