Ways to Use a Reverse Mortgage
A reverse mortgage is a special type of federally mandated loan designed to help seniors who have a substantial amount of wealth tied up in the equity of their homes trade that equity for a loan. This type of loan is unique because it allows the borrower to lie in their homes until they die or decide to sell their homes, mortgage free. Also known as a home equity conversion mortgage (HECM), a reverse mortgage provides many possibilities to seniors age 62 and older. If you are curious about ways to use a reverse mortgage, contact the team at Great Florida Lending Inc. We have helped hundreds of clients in Miami, Kendall, Hialeah, Coral Gables and the surrounding area apply for an HECM and achieve greater financial security.
Turn Your Equity into a Loan
When you first consider an HECM, you should understand the basics of the loan and begin to consider how extra income could benefit you. This type of loan is only available to people age 62 and older who have a substantial amount of equity in their current home. The value of each person’s loan depends upon their age and the amount of equity they have built in their homes. This type of loan can be paid out in a lump sum, in regular installments, function as a line of credit, or a combination of the three.
Choosing How Your Loan is Paid
You can choose how to receive your HECM payment.
Some clients choose to receive it as a lump sum. While this does make funds available immediately, it usually results in the lowest payout of all three payout options. Because of first-year limitations on how much you can withdraw, you may only receive 60% of the potential loan amount.
One of the most common types of HECM payout is through regular payments. After evaluating your unique financial situation, we can help you determine what type of cash flow will help you meet your goals.
A credit line type of HECM is great for clients who would like an emergency cash flow available or a rainy-day fund. With this type of plan, you only utilize your credit line when you need it, rather than receiving a regular or one-time payout.
Uses for an HECM
Many of our clients who take out a reverse mortgage do so to utilize the equity that they have worked so hard to build in their homes and receive extra income for everyday expenses. Many seniors are on a fixed income through a retirement plan or Social Security. This type of budget can be restrictive. An HECM can provide an extra income for everyday expenses or for an emergency or rainy day fund.
Some of our clients choose to use their HECM loans for house repairs or modifications. Simple updates to a home can create a more pleasant or comfortable living environment for a senior as his or her needs change. Others choose to update their homes for purely aesthetic purposes.
One innovative use of funds is to reinvest your HECM loan. You may choose to invest in other property or securities to help your money grow. The sky is the limit when it comes to the uses for an HECM loan.
HECM for Purchase
One common use for a reverse mortgage is an HECM for purchase. In this scenario, a senior uses the equity in his or her existing home to gain an HECM for purchase loan and purchase a new home. It is important to note that should you decide to use an HECM for purchase, you will need to complete your home sale and new home purchase at the same time as your HECM application. Our loan officers will help you understand the benefits of a traditional HECM for cash flow versus for purchase.
Get Started Today
We’re here to help you explore the many ways to use a reverse mortgage. The loan officers at Great Florida Lending Inc. truly care about the people of Miami, Kendall, Hialeah and Coral Gables. If you or a loved one is 62 or older, please contact us today. We can answer your questions or schedule a consultation about your financial goals and options to meet them.