What the Heck is HECM?

September 5, 2019

 

If you're not living in your Florida dream home, what's stopping you?

 

If you dream about buying a new home with modern design, amenities, and low maintenance, then you owe it to yourself to learn about a powerful alternative to using traditional financing or paying cash to purchase your next home.

 

Imagine moving into a new neighborhood close to friends and family, with walking paths, a clubhouse, and neighbors just like you...and doing all of this while retaining a large portion of your life savings.

You’re about to discover a little-known strategy that middle income and affluent Boomers like you have been using since 2009 to purchase their dream home: The Home Equity Conversion Mortgage  (HECM) for Purchase loan program, or H4P Program for short.

 

With this option, you can increase your purchasing power and significantly reduce your out-of-pocket expenses as compared to paying cash or securing traditional financing.

 

The H4P Program comes at a time when a lot of Boomers are trying to protect their nest egg and boost monthly income. If you’ve been secretly wanting to move into a new or newer home that better meets your lifestyle plan, then your time has finally arrived!

 

 

Why You Should Learn About the H4P Program

 

If you or your spouse is at least 62, then the FHA-insured H4P Program can help you purchase the home you really want without depleting a large portion of your life savings --- and save you thousands of dollars you would have otherwise lost in the process by making monthly mortgage payments.

 

The H4P Program is unlike a traditional home mortgage in that monthly mortgage payments are deferred and the loan balance increases over time. As is true of all loans, you must satisfy loan terms, which include, but are not limited to maintenance of the home and payment of property taxes, homeowner's insurance, and any HOA fees. The home must be your primary residence. However, there is a consumer safeguard built into the program that you need to know about. Because the loan is insured by the FHA, neither you nor your heirs have any personal liability for the repayment of the debt.*

 


So what does all that really mean?

 

It’s actually very simple...let’s say you use the H4P Program to purchase your dream home and decide to move in 10 years. When you sell your home you’ll receive 100% of the net proceeds after paying off the loan balance at the time of sale. This is exactly how a traditional mortgage works.

 

So the primary benefit to you during your living years is that you don't tie up all your savings by paying cash and, as long as you continue to meet loan terms, you increase your monthly cash flow by not having a monthly mortgage payment.

 

*If your heirs wish to retain the property after your death, they may do so by paying the lesser of the reverse mortgage balance or 95% of the appraised value of the home.

 

 

The Ultimate Leverage

 

This is about taking a single dollar from your life savings and putting it to work so that your lifestyle improves dramatically. What if there was a way to purchase your next home by combining a one-time down payment with the proceeds of a reverse mortgage?

 

Let’s take a look at how this is possible using a special matrix, because the concept is much easier demonstrated with pictures instead of words.


The H4P Program is based on 3 primary variables: your age, the interest rate, and the purchase price of your home.

 

-- Loan becomes due and payable upon a maturity event such as no longer maintaining the home as your primary residence or failure to remain current on property taxes, homeowners insurance, or condo fees. The HECM for Purchase Program may not be the best fit for everyone so we encourage you to consider all options prior to purchasing a home.

 

Using the matrix on the next page, simply match your current age with one of the ages listed along the top of the matrix.

 

For example, let’s say you’re 70. If your age is not listed then you can round to the nearest age listed. The next step is to find the expected purchase price of your new home listed alongside the left-hand side of the Matrix and round to the nearest price.

 

So in this example let’s use a purchase price of $350,000 and an age of 70. You can see that you would only be required to bring a down payment of $203,639* to closing.

 

 

These calculations are based on youngest borrower using the HECM fixed rate of 5.06% as of June 18th, 2018. APR Range 6.590%-6.940%. Loan charges include origination fees, mortgage insurance premiums, and settlement costs which are to be determined. Some of these fees may be financed into the loan. Interest rates and funds available may change without notice and not be available at the time of loan commitment. Prices subject to change. Please speak with your licensed loan officer to receive current rates including fixed rate options.

 

This information is for illustrative purposes only. Estimated fees, including up-front FHA mortgage insurance premium range from $11,000 to $21,000 depending on the value of the home (included in mortgage). Closing costs vary from state to state and can affect down payment. Please check with your HECM Loan Officer for actual figures. Your loan balance and interest will become due upon a maturity or default event such as no longer living in the home as your principal residence, failing to pay your hazard or property taxes, or failing to maintain your property.

 

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