HECM Loans: Not Your Grandmother’s Reverse Mortgage

The shortage of affordable housing is on everyone’s radar, and across the country real estate professionals are stepping up to be the solution for their clients and communities.

In her recently released whitepaper, EXIT Realty Corp. International’s Co-Chair, Tami Bonnell, shines a spotlight on four of the key areas where real estate professionals are making a positive impact on the housing crisis: service, volunteering, education, and advocacy.

“Because real estate professionals are in the trenches every day, collectively we have one of the strongest voices for change. As members of the National Association of REALTORS®, we are part of a well-respected and impactful organization championing change across the U.S.,” says Bonnell.  “This organization is a major policy influencer, so keeping abreast of and joining their advocacy efforts are key.”

In addition to participating in organized real estate, Bonnell believes real estate professionals have a responsibility to advocate for and inform their clients about various options available to them, including creative financing. For example, baby boomers own the majority of real estate in the U.S., but with living on fixed incomes and the rising cost of living, many find themselves house rich and cash poor, threatening their ability to continue to own a home as they age and take on extra costs like in-home care. One option to free up cash and make home ownership more affordable for this group is a Home Equity Conversion Mortgage (HECM) for seniors.

HECM loans are not your grandmother’s reverse mortgage; they are backed by the FHA and HUD and are only available through an FHA-approved lender. These loans are available for people aged 62 and older for their primary residence. The borrower can refinance their home or purchase another with 40-60% down and never make a monthly mortgage payment. The borrower and their heirs will never owe more than the home’s value when the loan matures, and the home is sold.

Here’s an example of how someone might benefit. The homeowner is living in Maryland but her family lives in Florida. Her primary income is Social Security, and she wants to live near her family. Her home is worth $600,000, she sells it and clears $350,000 because she had a $250,000 mortgage. She puts her $350,000 down on a house in Florida (representing a 40-60% down payment). She qualifies for a HECM loan for the balance and now she has no monthly mortgage payment and enjoys a better quality of life in a house she can afford near her family. HECM loans can help free up inventory and help seniors enjoy a more affordable way to live. 

Talking about problems expands the problems. Talking about solutions expands the solutions.

Read this and more in the Nov/Dec issue of The Residential Specialist newsletter.

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