Did you know there are thousands of mortgage products in the United States? Maybe you have only ever heard of a 30 or 15-year fixed- rate mortgage or a HELOC (Home Equity Line of Credit). Or maybe you had an ARM (adjustable-rate mortgage) in the past. However, there are thousands of unique loan programs that each serve a very specific purpose. There are programs designed for first-time home buyers while other programs are designed for construction or rehabbing a home, and others are designed for doctors, business owners or rental properties, and so on. What I find fascinating is that each of these loan programs is unique and each program is designed to serve one single purpose or one single type of client.
What I love about the Home Equity Conversion Mortgage (HECM) is that the ways to utilize the program are endless and it can be used by virtually anyone age 62 and over with a significant amount of equity in their home. This is why I call a HECM, the Swiss Army Knife of mortgage products. Let me give you a few examples of how some of our clients have recently used their HECM:
To pay off a mortgage: The most common goal for clients using an HECM is to pay off their mortgage so they can eliminate making any more payments of principal and interest.*
To consolidate debt: Medical expenses and credit card debt can add up and they require large monthly payments. Using a HECM to pay off debt can greatly improve cash flow.
Home improvement: Use your equity to help improve your home and your home’s value. This can be for deferred maintenance, remodeling, handicap accessibility, or just normal upkeep.
To cover property taxes and home insurance: Property taxes and home insurance costs have skyrocketed recently! Allow your home equity to cover the costs of annual taxes and insurance.*
To purchase a vacation home: If you have dreams of spending part of the year somewhere else, why not use your home equity to purchase a vacation home and diversify your real estate portfolio?
Right-sizing (purchase a new primary residence): Use your equity as a bridge to purchase a new primary residence and avoid making monthly payments of principal and interest.*
To cover the cost of assisted living for an ailing spouse: Instead of selling your home to help cover the cost of medical care, use your equity to cover additional medical or living expenses.*
To travel more: Are there still places you want to travel to and people you want to visit? Use some of your equity to enjoy your go-go years!
Gifting to family members: You do not need to wait until you die to give your kids or grandkids an inheritance. You can give some of your wealth away today while you are alive, and you can watch them enjoy your gift.
Gifting to charity/ non-profit organizations: Give a gift to charity while you are alive so you can see the benefits of your gift. Charities need our help today, why wait if you do not need to?
Create a growing line of credit (LOC) for future unplanned expenses: Life is unpredictable. Be prepared for the future and create an LOC today so you have access to money when you need it.
Purchase a rental property: Use your equity to buy a rental property to create passive income through an investment property and further diversify your real estate portfolio.
This is by no means a complete list of ways to utilize a reverse mortgage. However, I hope these examples help you to better understand the endless possibilities of how a HECM can help you.
*You must continue to occupy your home as your primary residence and continue to pay your property taxes, homeowner’s insurance (and HOA dues if applicable) and maintain your home.
By Gabe Bodner. Gabe is a retirement mortgage planner and licensed mortgage originator in Colorado. Gabe utilizes the latest research from the top researchers to assist his clients in living for today and planning for tomorrow. To reach Gabe, call 720.600.4870, e-mail [email protected] or visit reversemortgagesco.com.