Posts Tagged non-HECM

HECM or non-HECM? That is the question…

With the interest rates for HECM tied into the government set security rate, one might immediately question why anyone would choose non-HECM at the risk of incurring more costs.

However, private reverse mortgages are just as desired and successful as their government backed predecessors. As with anything government backed, HECM reverse mortgages lack flexibility in their options. Given the initial costs of setting up a reverse mortgage, the government cap at 2% of the property value can make what seemed cheap comparatively expensive; particularly when you factor in the important requirement that a reverse mortgage be the only secured debt on the property.

Take the following example:

Homeowner A with a $200,000 property and $8,000 secured loans looks to take out some equity to fund their grandchild’s college fees.

The HECM maximum would be $4000.

Not enough to clear the secured debts.

Now the same example using non-HECM

Homeowner A takes 20% of their property value ($40,000), rids themselves of the secured loans that can often incur high monthly payments, and is left with $32,000 for their original and worthy purpose – to help fund their grandchild’s college fees.

For those looking to take out a small percentage of their property, or for those with a property of substantial value, HECM is the way forward. For all others, the private options look far more attractive.

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