HELOC or HECM?
By Jim Doyle ~
Are you one of the estimated five million Americans 62 years and older who have a HELOC (Home Equity Line of Credit) as either your first lien or second mortgage? Many home owners have been paying interest only and are nearing the time for their HELOC to reset with a higher payment. On a fixed income, this additional cost may be difficult.
Refinancing into a HECM (Home Equity Conversion Mortgage, or reverse mortgage) may be the answer. The HECM has the benefits of a HELOC and several additional advantages. In both cases, you retain ownership of your home, but the HECM pays off your mortgage and HELOC, leaving you free of those monthly payments. If you’d like to make payments (in amounts of your choosing) toward the HECM, you can. Or you have the option to pay nothing.
The unused portion of the HECM line of credit will grow at about 5% a year making more funds available in the future, and the line of credit cannot be reduced or revoked by the lender as long as obligations are met (pay property taxes and homeowners insurance, and maintain the home). With a traditional HELOC the lender can close the line of credit as happened in 2007 and 2008.
A HECM is government insured, and is a non-recourse loan, meaning there will be no debt to your heirs or estate. Since the average Baby Boomer has less than $50,000 in retirement savings, unlocking some of the equity in your home without having to sell or make monthly payments may make sense.
If you have been thinking about getting a HELOC, or have one that is due to reset, it may be wise to learn about the options available to you with a Home Equity Conversion Mortgage, commonly called a reverse mortgage. Contact your local Reverse Mortgage Specialist for more information on your specific situation.
Jim Doyle is the VP of Lending and a Reverse Mortgage Specialist at Silver Leaf Mortgage in Centennial, CO. Direct: 303-875-5994 JimDoyle@SilverLeafMortgages.com | NMLS# 1394377
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