HECM Reverse Mortage Loan [mortgageapproved.blogspot.com]
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The reverse mortgage loan uses the equity of the home. The greatest benefit of the reverse mortgage loanis, that there is no monthly back payments, but everything will be paid back, when the reverse mortgage loan will be closed.
1. HECM Allows The New Home Purchase.
This is principally true, but the terms are different from state to state. Generally speaking a borrower has the freedom to use the money as he will. However, it is wise to discuss with the counselor about the details.
2. HECM And The Interest Rate.
Typically the HECM uses a variable interest rate, which will follow the market price from month to month. Now there is a new product type, a fixed rate HECM. This helps a borrower in the financial planning and gives some peace of the mind, because it will not bring any surprises.
3. Better Terms With Libor.
Earlier the lenders used CMT index to measure the margins for the reverse mortgages, but changed into Libor, a London based index. The reason was to maximise the cash returns to the seniors.
4. More Weight On The Counseling.
The counseling is very useful for the seniors, because they can get useful guidance and because it can reveal the scams, which have appeared in the market. The main job is to guarantee, that the seniors honestly understand the details of these loans and know, what they will sign.
5. ARM HECM Option.
When a senior borrower will use this option, he has a lot of freedom, how the lender will pay to him. The alternatives are the lump sum, the monthly payments, a credit line or the combination of some or all of these.
The schedule depends on the financial needs of a senior.6. The Refinancing Possibility.
HECM is a great tool to refinance the mortgage package. If the interest rates are low, a senior can use the refinancing alternative to sign a reverse loan agreement with a fixed interest rate. This means lower interest rate and also the payment free months, which is a great help for the senior. If a senior is 62 or over and owns a home, where he has equity left, HECM is a great way to get some extra cash for the future use.
The loan amount depends on the age of the borrower, on the appraised value of the home and on the interest rate level. The lender will not ask the income information nor the credit score, because the home equity and the mortgage insurance will guarantee that the lender will get his money and that the borrower cannot lose other assets, than his home equity.
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