The Time is Now for a HECM
Timing is everything. What you need to know about a Home Equity Conversion Mortgage (HECM) and a Reverse Mortgage (RM).
You've heard it throughout 2020, but I'll repeat it: these are unprecedented times. We are living in a pandemic that has had a ripple effect across the U.S. economy, leaving more than 40 million people without jobs in the past few months. As the pandemic lingers, many household budgets are starting to thin out, raising concerns for families nationwide.
Yet, at the same time, the real estate market is thriving. According to the real estate blog, Keeping Current Matters (KCM), the housing market forecast indicates a strong year-end finish, fueled by a work-from-home population that craves more space in less densely populated areas. KCM reports that 49% of American adults are actively engaged in finding a home, up from 41% a year ago.
What's good for the residential real estate market also benefits the HECM/RM market.
As we've learned, a HECM/RM allows homeowners age 62 and older to tap into a portion of the equity in their home for use in retirement. This allows seniors to age in place at home rather than elsewhere.
And the two factors driving the real estate market -- interest rates and property values -- indicate that now is an ideal time to consider a HECM/RM. Here's why:
Rates are at a (new) record low
Yes, it's true. Rates across the board, including the LIBOR rate (which HECM’s are tied to), are at a record low. The FHA also increased loan limits for HECMs in late 2019, meaning borrowers who apply for a HECM/RM now through December 31, 2020, can access more equity than in previous years.1
Property values are high
Home prices rose during the pandemic and could increase even further due to heavy buyer competition and a significant supply shortage. In July, the national median home price gain marked 101 straight months of year-over-year gains.2
The good news for HECM/RM candidates is that increasing home prices mean more equity that can be accessed.
Locking into a HECM/RM ensures that you have access to an optimal amount of equity. If the market moves in the opposite direction during the time you have your HECM/RM, you are protected by what the appraised home value was at application/ closing, it would not decrease.
While the forecasts indicate the market will remain strong, there is no guarantee that the market will continue upward. Securing a HECM/RM even if you don't tap into it until later, is the equivalent of bringing a sweater with you even when it's warm out: It's better to have it and not need it than need it and not have it.
Still unsure if a HECM/RM is right for you? Let Renee Guidaboni Coleman help you consider all your options to make the best decision for your financial needs for your particular stage of life.
Call Renee at 978-737-7489 or email her directly at http://[email protected] for your consultation.
About Renee Guidaboni Coleman of CrossCountry Mortgage
Ensuring that a HECM/RM is a viable financial option for you is Renee's priority. In your initial consultation, you'll learn about eligibility and property qualification requirements, the pros and cons, and options for receiving your money. From there, the decision to move forward is ultimately yours.
A HECM/RM maybe a viable financial option worth exploring in cases like:
• If you are a senior homeowner who is planning for or entering retirement
• If you have an elderly parent or relative who is seeking additional funds to supplement their income or a resource for home repairs and modifications
Renee frequently consults with financial planners and estate planning attorneys who are exploring HECM/RMs as a money management tool for their clients.