A Unique Retirement Planning Tool
One size doesn’t fit all.
Retirement should be a worry-free time of life. Unfortunately many older homeowners worry about having enough money to maintain their standard of living throughout their retirement years. In the right situation, a HECM may be an excellent solution.
What the heck is HECM?
The HECM (Home Equity Conversion Mortgage) was created in 1989 to assist older homeowners in maintaining their quality of life and remain in their home during retirement. It is a unique loan in that no monthly mortgage payments are required yet it converts a portion of the home’s value into tax-free cash or a line of credit (consult a tax specialist).
HECMs are generally used to keep retired homeowners in their house.* However, more recently, HECMs have gained popularity to purchase a new home.
A HECM for purchase.
If you or someone you love who is 62 or older has said, “I don’t have enough cash to afford a new home,” and “I can’t qualify for a traditional mortgage.” – an H4P loan might be a good solution to upsize or downsize without needing to tap into cash reserves or retirement.
A HECM Home Equity Line of Credit.
One of the most overlooked yet beneficial features of the HECM is the line of credit. Unlike traditional home equity lines of credit, which can be closed or reduced, this special credit line is secured and cannot be reduced if home values decrease or interest rates increase. Even better, the unused portion of the credit line increases each month your clients don’t use it! The line of credit grows each month based on the current month’s interest rate and ongoing insurance charge. Many older homeowners have set up the line of credit for use by the surviving spouse to offset loss of income and much more.
Benefits of The HECM Line of Credit include:
- No Use, No Charge – You are only charged interest and insurance on the funds you use in your HECM loan. Any unused portion of the credit line does not incur these costs.
- Strategic Withdrawals – Some notable financial planners have outlined strategies where retirees may choose to use part of their line of credit rather than take income from investment accounts whose value may be declining in a given year.
- Please note: Loan advances from a HECM are traditionally not considered taxable. Borrowers are advised to seek the advice of a tax professional.
Contact us today to get a HECM Consultation to learn more – or for a HECM Total Cost Analysis. We’re here to help you make an informed decision about what is right for you and your family.
*Borrower must maintain home as primary residence and remain current on property taxes, homeowner’s insurance, the costs of home maintenance, and any HOA fees. Repayment of the loan is required if you sell, move, or pass away.