Tony Newton asked:




You’ve probably have heard of home equity conversion mortgage or HECM. This was introduced by the government through the Federal Housing Administration as a way to assist senior citizens to secure loans. This is a federally insured government program which makes it easier for senior citizens to use their home equity value in order to take out a loan.

What are the Benefits of a Home Equity Conversion Mortgage?

This federal program is distinct in so many ways. First off, the borrower is not required to pay off the loan on the condition that the home he place as collateral is his primary residence. This is entirely different from a traditional loan where you would be required to give monthly payments. You also place your house at risk because the lender would place a lien over your property.

HECM is completely different. As you withdraw your money from the loan, the amount of your home equity proportionally decreases. What happens if you have completely used up your entire home’s equity? The government’s insurance would sustain your loan so you would still be able to withdraw money from your loan. In fact, you would still be able to receive payment even if your lender goes bankrupt or goes out of business. You don’t actually place your house at risk with HECM. Your real estate title stays with you.

The second unique feature of HECM is the term of its repayment. The terms and conditions of an HECM are pretty convenient and reasonable. The borrower has various terms of payment to choose from which includes opting for equal monthly payments or a line of credit type of payment.

The amount of the loan that a borrower can apply for varies depending on several factors which include:

a. The applicant’s age at the time of the loan application

b. The amount of house equity

c. The limit of FHA HECEM loan in the region

d. Current market interest rates

The drawback, however, to this type of loan is that you may completely diminish your home’s equity that there’d be nothing left for your children. Fluctuating and harsh interest rates may also affect the amount of your loan to the extent that the interest alone could largely decrease your house equity.

Understanding the Requisites of HECM

You actually continue to receive loan payments as long as you comply with the requisites of HECM. In fact, you could continue to receive HECM payments for the rest of your life upon the condition that you continuously comply with the requirements for HECM payment. In order to avail of HECM, however, you should be able to comply with the following prerequisites of home equity conversion mortgage include:

a. The applicant is 62 years old or older

b. He should be the owner of the house

c. He should be actually residing in the house

d. He must have a small mortgage balance

e. He must attend counseling sessions about HECM before he actually applies for a loan

Home Equity Conversion Mortgage continues to gain popularity. Many senior citizens resort to applying for home equity loan as an additional source of retirement fund. It is believe that HECM would soon play a significant role in the lending industry.

Leonard

Evelyn Whitaker asked:


. Secondly, the lender may allow you to deduct the interest because the debt is secured by your home. However, securing a home equity loan, you should compare the costs of the equity from your home against the benefits. Ideally, you should opt for such credit terms that meet your requirements without inviting financial risk.

Types of Home Equity Loans

Second mortgage- In a second mortgage, you get a fixed amount of money that you can repay in equal monthly installments over an extended period of time. You can consider a second mortgage if you have a definite needs for a specific purpose, usually renovations, making additions, etc.

Reverse mortgage - By applying for a reverse mortgage, you can convert a part of the equity in your property into cash, and most importantly, you do not have to sell your home or incur additional charges.

The three basic types of reverse mortgage:

Single-purpose reverse mortgages: Generally have very low costs and can be used for one purpose specified by the government or nonprofit lender.

Home Equity Conversion Mortgages (HECMs): These are usually costlier and up-fronts are generally higher when compared to other types of mortgages. The advantage of home equity conversion mortgages is that these are widely available, have no income or medical requirements, and can be used for any purpose.

Proprietary reverse mortgages: These typically private loans are usually backed by the housing development companies.

Myself webmaster of www.castlemortgagegroup.com dealing in all type of mortgage loans in Florida, Georgia & Alabama with home equity loans, Florida Home Equity Loans, refinance loans, constructions loans



BURT