Home Equity Conversion Mortgage (HECM) - HECM for Purchase - Senior Market

[Mel McLeod]

The HECM is for the senior market, age 62+. I am an agent with a very large carrier (think about Marlin Perkins from Wild Kingdom :) and this FHA insured loan is the only loan for which I originate. Many seniors, 62+ would like to upsize, right size or downsize. However, they may be in a home already fully paid off and they don't want to dig into other assets to move, so they usually just don't. If you are a flipper/investor, this may be a great alternative for the senior market. As long as the home is primary, we can do a HECM for purchase. They would need to put "about" 60% down (based on their DOB and current rate) using current market 2023 rates (usually proceeds from sale of their existing home, but may have the assets). There would be no further payments required as long as they live in the home as their primary. The value of the home is FHA insured for the life of the loan which means that no matter the market value, the equity continues to feed the line of credit (if applicable). With no payments, the loan balance also grows at applicable rates. Some of my clients actually still make payments to it because every dollar of their payment feeds into the line of credit for future cash reserve (they get to control how much to pay, or as said no payment ever required). Every situation is different, of course. But that's the beauty of this loan. It can be configured a number of different ways. It can be configured to provide the ability to purchase a new home, provide an additional tax free income, or if the borrower wants to refinance their existing, the current mortgage can be paid off with this loan and many times there is still a line of credit left. For seniors who don't want to move and their current home is paid off, it can be configured simply as a big line of credit that keeps growing over time in borrowing capacity for future cash reserve needs; in this scenario, there's no lien until they access the line of credit although most roll the closing costs into the loan (small lien that would grow at current rate). The borrower stays on the deed to the home just like any other traditional mortgage. They are responsible for paying property taxes, HOI and HOA fees, or we can configure the loan to pay the taxes/insurance also. Builders are catching onto this opportunity because many times this loan gives the senior the opportunity to build their dream home with many upgrades. Financial advisors see it as a buffer alternative cash resource to avoid depleting investments, giving assets a chance to recover. Basically the home is used to feed their retirement, protecting any other assets for their estate (if applicable). There is a required credit check, however, underwriting is a little different from traditional loans in this regard. Reach out anytime if you'd like to talk through some scenarios.