NewStyle Communities is happy to share a financing option that many of our homeowners have used to save thousands on our maintenance-free homes. Share the peace of mind many of them enjoy with the HECM (Home Equity Conversion Mortgage). In this article, we’ll review some information about this option and how it works.
What is a Home Equity Conversion Mortgage?
The HECM for Purchase program is an age-based mortgage. It’s insured by the FHA for folks age 62 and older where monthly payments are deferred and the loan balance increases over time. Since the loan is insured by the FHA, neither the borrower(s) nor their heirs are personally liable for the debt.
How Does it Work?
Here’s an example of how a HECM works. Let’s say you use a HECM to purchase your dream home, and then decide to move in 10 years. When you sell your home, you will receive 100% of the net proceeds after paying off the loan balance at the time of the sale.
Why Choose a HECM Versus a Traditional Mortgage?
You might be thinking, “This is exactly how a traditional mortgage works.” So why choose a HECM? The primary benefit is for you. When you use a HECM, you’ll have more money during your living years. Since you will not be paying a monthly payment to a mortgage company, you increase your monthly cash flow. Imagine what you could do with the extra cash in your pocket!
The secondary benefit is for your heirs. What if, at the time of your passing, your loan balance is greater than the value of your home? In a traditional mortgage scenario, your heirs would be forced to sell the home at a loss and cover the difference. However, the terms of a HECM mandate that neither you nor your heirs are personally liable to cover the difference if your home is sold for a loss. Simply put, no one will be coming after your estate for a settlement.
Would the HECM Work for Me?
Check out the matrix table here on our Financing page. Take a look at the snapshot to see what’s possible for you based on your age and the purchase price of your new home. For example, you might be able to purchase a $500,000 home with a one-time payment (at closing) of $292,915* and never make a monthly mortgage payment.
For more information about Home Equity Conversion Mortgages or other forms of financing, contact one of our sales consultants, noted below.
*For a 75 year old