How a HECM Reverse Mortgage Saved a Homeowner Over $200,000

Most people think a reverse mortgage is designed only for low income seniors… people who need money to support their lives during their retirement years. They’re wrong about that. In fact, even if you have $1 million or more in your retirement account, using a reverse mortgage in some situations could save you hundreds of thousands of dollars… and I’m about to describe a real life situation where that’s exactly what happened.

First let’s define what we’re talking about…
Today’s reverse mortgages are more accurately referred to as Home Equity Conversion Mortgages and they’re known by the acronym: HECM. A HECM is basically an FHA insured mortgage that’s only available to homeowners over 62 years of age with significant equity in their homes. What makes the HECM unique is that it doesn’t require the homeowner to make any payments on the loan until the home is either sold by the homeowner… or when it’s sold or refinanced by their heirs. Homeowners can choose to make interest only payments, if they want to… or they can choose to make principal and interest payments… or they can make no payments at all until they die or sell the home.

When you have a HECM, you still own your home… just like with any other mortgage. You still have to pay your property taxes, insurance and normal maintenance, but you don’t have to make any payments on the loan if you don’t want to.

A better source of capital…
If you think about it, a HECM is simply a source of capital that homeowners with equity can access after age 62. And in many cases, it’s a better source of capital than the alternatives because it doesn’t have to be repaid on any certain schedule, it’s available at a relatively low interest rate… and it’s tax free.