Interest rates and inflation are rising rapidly. The good news is, so are home values. This means if you are feeling the squeeze from rising prices at the gas pump and grocery store, your home equity may be the key to your financial freedom. How does no monthly mortgage payment and instead having payments made to you monthly sound? Too good to be true? It may be within reach.

A home equity conversion mortgage (HECM) is an FHA/HUD reverse mortgage product available to borrowers 62 and older. Reverse mortgages are more similar to their forward (traditional) mortgage counterpart than most people realize. The main difference is, with a traditional mortgage, the homeowner makes payments to the lender, so the loan balance decreases over time. With a reverse mortgage, the lender makes payments (or provides a lump sum payment) to the homeowner, so the loan balance increases over time.

The Department of Housing and Urban Development (HUD) has put many safeguards in place to ensure reverse mortgage candidates are well educated on the program before they can participate. There have been many misconceptions about reverse mortgages, deterring many from considering the program. Here are some common questions borrowers have when considering a reverse mortgage.

Learn how a Home Equity Conversion Mortgage May Benefit You

will I still own My home?

Yes, just like with a traditional, forward mortgage, the home will still be titled in your name and the bank puts a lien on your property to ensure the loan will be repaid.

Will My Heirs Be Responsible for Repaying the Loan?

Just like with a traditional mortgage, heirs may pay off the balance or sell the property and keep any remaining equity once the reverse mortgage is repaid. A reverse mortgage is a non-recourse loan which means the lender can only be repaid from the proceeds of a sale. Any remaining proceeds, after repayment of the loan, will go to the estate.

can The Bank Take My home?

You must retain the home as your primary residence, keep it in a good state of repair and remain current on property taxes and insurance coverage. FHA/HUD states that you cannot be forced out of your home with a reverse mortgage.

Will my Spouse be forced to leave?

As long as your spouse can continue to meet the conditions of the loan, they cannot be forced to leave the home if you pass away or move into a nursing home. This is a protection put in place by HUD.

In Conclusion

As interest rates rise, inflation hits record levels and home values continue to rise, a home equity conversion mortgage may be a benefit to seniors aged 62 and older. It’s best to consult with an experienced mortgage loan officer, your financial advisor and/or your tax consultant to ensure you are maximizing your home equity in retirement.