Mandelman Matters

The HECM Line of Credit: It Should be Called the “Retirement Mortgage”

I need to straighten something out that is both important and widely misunderstood.

HECM is the acronym used to describe the federal government’s insured mortgage program for homeowners over age 62… it stands for Home Equity Conversion Mortgage. It’s also described as a “reverse mortgage,” which makes it sound like something that should be avoided if possible.

The term “reverse mortgage” has a certain stigma attached to it. Some people think that having a reverse mortgage means that the bank will own your home, which is not true. Others think that reverse mortgages are expensive, which is also not accurate.

But the HECM really shouldn’t be called a “reverse mortgage.” It should be called a “retirement mortgage,” because that’s what it is. A HECM mortgage is simply an FHA insured mortgage designed specifically and exclusively for homeowners over age 62… those in or approaching retirement.

The key difference between a HECM and a traditional mortgage is that with a HECM, you get to decide when you make payments on the loan. You can decide to make monthly payments of principal and interest, in which case it works the same way a traditional mortgage works.

Or you can decide to make interest only payments, in which case your principal balance stays the same. You can also decide to make no payments on the loan, in which case the interest gets added to your balance.

I speak with professionals almost every day, lawyers, CPAs, financial planners, retirement coaches...and almost all of them say the same thing to me, "I didn't know the HECM could do that!"

That tells me there is simply not enough information out there, ACCURATE information on what a HECM is and isn't...what it does and doesn't do.

So if you want to find out more for yourself or your clients...DM me, or email me at [email protected] Let's chat!

N

media2.giphy.com