While many people may not recognize the term Home Equity Conversion Mortgage or HECM, they will recognize the common term for this financial option. Reverse loans, or HECM loans, are an option for homeowners over the age of 62 to consider to access the equity they have built up in their home.
As this is a very big financial decision, and it is not the right option for everyone over the age of 62, there is a specific process to apply for and obtain a HECM loan. Reputable lenders will ensure that consumers are aware of the process, and they will follow all the required elements of processing applications, providing independent counseling, and working with borrowers to make the process both easy and very transparent.
The Application
As with any type of loan or mortgage, the applicant will have to complete a comprehensive application for HECM loans. Typically, before starting the application you should talk to a professional from the company you have selected and be sure to understand the entire process.
It is also highly recommended to speak with your financial planner or investment professional prior to starting your application. Of course, you can always choose to halt the application process at any time, even after you are approved, if you change your mind.
Federal Government Approved Counselors
Your application will not be processed until you have completed a discussion with a government-approved counselor. This professional is not affiliated with the lender, and will provide non-biased information on the reserve mortgage process.
He or she will also review the requirements for the mortgage, as well as your current and future financial situation. This is the time to ask any questions and make sure you are very clear on what is involved with all aspects of the loan.
Home Appraisal
To determine the amount for HECM loans, an independent, third-party licensed professional will appraise the home. This is a relatively simple process and one similar to that completed by any bank or financial lender for any type of loan using the home as collateral.
Next Steps
Once this is completed, you will receive the funds in the form selected. This can include having the lender pay off your existing mortgage, receiving a lump sum or monthly payment or even setting up a line of credit.
You will need to continue to meet all requirements by the lender. This will include maintaining the home in good conditions, paying all homeowner insurance and property taxes, and living in the home as a primary residence of at least one of the borrowers. During this time there is no repayment required as long as these conditions are met, giving you more cash flow to use as you see fit.
Longbridge Financial can provide HECM loans to qualified homeowners across the United States.
