Home Equity Conversion Mortgage Flexibility

Discover the flexibility of a Home Equity Conversion Mortgage (HECM) and learn how you can access the equity in your home for various purposes.
Home Equity Conversion Mortgage Flexibility

I thought I would begin this article with a pun about flexibility but decided not to because it would be too much of a stretch.

As I get older, I realize more and more how important it is to stay flexible, physically, financially, mentally and emotionally. Unfortunately, it takes a lot of effort to keep this mindset. I wish I was more like the Home Equity Conversion Mortgage (HECM) because flexibility is built in with this dynamic, 34 year old program.

The HECM is the FHA insured reverse mortgage program that is specifically designed for homeowner’s aged 62 and above, that allows you to convert a portion of the value of your home into money, without having to sell the home, give up title or obligate yourself to a monthly mortgage payment. Since the home stays in your name, it is still your responsibility to pay your homeowners insurance and property taxes, as well as maintain the home and live their as your primary residence.

The HECM has been around since 1989 and has a number of different ways for you to convert a portion of the illiquid equity you have built up in your home into spendable funds. This article will explain the different ways you can receive funds from the HECM reverse mortgage program.

First, I need to explain that FHA dictates to the lender how much they are allowed to loan. There is no set “loan-to-value” like there is with a forward mortgage. It is different for every borrower based on three things:

  1. Age of the youngest borrower (or non-borrowing spouse)
  2. Value of the home
  3. Interest rate*

Generally speaking, the higher the interest rate, and the younger the borrower (or non-borrowing spouse), the less money you can receive as a percentage of the value of the home. The lower the rate, the older the borrower (or non-borrowing spouse), the more money you can receive.

Having said this, given the interest rates as of today, January 2023, most borrowers are able to access between 35%-55% of the value of the home. Any existing loans against the home need to be paid in full from the loan proceeds. Whatever funds available after this are the borrowers to do with as they wish.

For example, if your home is valued at $500,000 and you are 68 years old, you could receive about $183,000 after closing costs. If you have an existing mortgage balance of $180,000, this will have to be paid first and then you would receive the $3,000 that is left.

People often ask, “If I am only getting $3,000 from this loan, why would I do it?” The reason is because you would be eliminating the principal and interest portion of your mortgage payment. If your principal and interest equal $1,200 per month, and you took out a HECM to pay this loan off, you would no longer have this expense in your monthly budget. In this case, your biggest benefit would be saving $1,200 per month.

If you happen to own a $500,000 home outright (with no loans against it), you have a lot more options in the way you receive the funds.

  • A lump sum (with some FHA restrictions)**
  • A monthly payment guaranteed to last as long as you or your spouse live in the home
  • A monthly payment over a specified time period
  • A Line of credit
  • Any combination of the above

You can also change any of these plans after the loan is in place. For example, let’s say you decide to set a monthly payment to you of $500 per month with a line of credit of 50,000, but a year later your situation changes, and you now need $700 per month. You can increase your payment and reduce your line of credit. Or if you do not want to reduce the line of credit, you can shorten the term of the monthly payment. There is just a one-time $20 fee to make any changes after the loan is closed.

Think of the HECM like buckets of money. You have in this case, $183,000. If you want a monthly payment of $500 per month, we have to take a portion of the $183,000 and set it aside to send you that money every month for however long you request it. If you want $20,000 at the closing, we have to take it away from the original $183,000 to give to you. Everyone has different ages, different values and different interest rates. Because this loan doesn’t have a set amount we loan to everyone, it is truly a personalized loan and we can customize it to fit your needs.

This is why I say the HECM is so flexible. We can pull, twist and shape it to your individual financial needs.

Bruce E. Simmons, CRMP
Reverse Mortgage Manager
American Liberty Mortgage, Inc.
303-467-7821
www.reversemortgageradio.net
bruce@almortgaeginc.com

*There are two different interest rates with the HECM program. One is called the “initial rate”. This is the rate the borrowers are actually charged on the outstanding loan balance once the loan closes. This rate is calculated but taking the one-year treasury index and adding the margin to it. The lender decides the margin. For example, if the one-year treasury index.

**FHA restricts the amount you take from the HECM during the first 12 months of the loan to 60% of the amount available (principal limit), unless the liens against the home exceed this cap. If the outstanding liens on the home exceed 60% of the principal limit, FHA allows you to take enough out to pay them off, plus an additional 10% of the principal limit.

Bruce Simmons

Bruce Simmons

I absolutely love what I do - working with senior homeowners to help them live a more comfortable, flexible and secure retirement. I have the absolute best customers in the world, and even though I worked in the forward mortgage business for a number of years, I could never go back to doing conventional loans. I'm a 100% reverse mortgage specialist.

5.0

I met Bruce from a referral who just love what he did for them on their Reverse Mortgage, So I contacted Bruce and told him my story and he came up with a great Reverse Mortgage for me and my needs and now I am living good and not worrying about Finances anymore. He had it done in a timely manner. If you are looking for the MAN to help you get the best Reverse Mortgage you need to call him and hope you let him help you.

Bruce is one of the most professional, knowledgeable and efficient experts I have worked ŵith ever in any field. He is fast to answer and always ready to help...and he's a great guy!

I was hesitate about getting a reverse mortgage until Bruce Simons put my mind at rest. He is easy to work with, extremely knowledgeable and efficient. Things get done and he will make sure that you understand every part of the process. I interviewed several other people and he was hands down.....The only choice.

Doing a Reverse Mortgage is a major decision, when working with Bruce he came out personally to go over every thing in detail, there was no pressure to finalize the transaction, I had even put the loan on hold for awhile even though I had locked in my rate, I had called Bruce off and on for a few weeks to ask questions that I had concerns about and he was always available to talk to me. In the end it gave me time to feel comfortable about my decision to move forward with the Reverse. Bruce was very pleasant to work with and would certainly recommend Bruce if you are going to consider a Reverse Mortgage.

Bruce Simmons at American Liberty is one of the best in the reverse mortgage industry. I have known and worked with him for years and he always does a great job. You are in good hands with Bruce and know that he will take good care of you or your loved ones every step of the way.

Best thing I ever did! Bruce Simmons at American Liberty Mortgage is the best. He is always there to answer your questions, and can easily explain the whole idea of a Reverse Mortgage. He takes the time and goes through the entire process with you. It worked out so well for me. Thank You Bruce!

We had researched Reverse Mortgages for 5 years and after hearing about Bruce Simmons and meeting with him, we finally decided to move forward with the Reverse Morgage. It has been over a year now and we are still very pleased with our decision. We think Bruce is very professional, knowledgeable and honest. Thank you, Bruce, for all your help.

I first met Bruce Simmons 2017. I found him on the internet. I was looking for someone local. I called him and explained I was only looking into doing a reverse mortgage, so I did not want him to think this was something I was ready to do. Bruce was friendly, very open about the basics of a reverse mortgage. Bruce came to my home and presented the figures and other details that he could offer. The first thing that impressed me was this was not a hard sell, more of a informational meeting. He was very open about all of the details, and answered my questions without hesitation. What really was evident was he was establishing a relationship with me, and I realized he knew I would not take the loan at that time. There was not enough equity in my home, and I would have to bring money to the table. Although I was not ready to do a loan, Bruce assured me he is always available for questions. Four years later, I finally did do a reverse mortgage, and I couldn't be happier with having done it. I have done away with a mortgage payment which allows me to fund my retirement account with that mortgage payment. We did some much needed landscaping with our cash out transaction, and will move on to improvements inside of the house. My reverse mortgage has a line of credit, and I feel sense security knowing it is there if I need it. Bruce explained that a reverse mortgage is not for everyone, but I feel certain that he paved the way for a strategy that worked for me. I will definitely do a refinance when the time is right. I will check in with Bruce to be sure what the benefits are when I do it again.

I have worked with Bruce Simmons for 15 years. Bruce is one of the best in the industry. He is extremely knowledgeable, kinds and detailed in what he does. His clients love working with him and trust him to help them with their Reverse Mortgage loans. I would recommend Bruce to anyone I know that is thinking about or wanting to do a Reverse Mortgage. He will always take very good care of the customers and make sure their needs are met! Class act and one of the best in the industry by far!

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Just left us a 5 star review

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John Wickersham
December 22, 2022

I met Bruce from a referral who just love what he did for them on their Reverse Mortgage, So I contacted Bruce and told him my story and he came up with a great Reverse Mortgage for me and my needs and now I am living good and not worrying about Finances anymore. He had it done in a timely manner. If you are looking for the MAN to help you get the best Reverse Mortgage you need to call him and hope you let him help you.

google
Tim Mallory
November 11, 2022

Bruce is one of the most professional, knowledgeable and efficient experts I have worked ŵith ever in any field. He is fast to answer and always ready to help...and he's a great guy!

google
Kathleen Mitchell
September 18, 2022

I was hesitate about getting a reverse mortgage until Bruce Simons put my mind at rest. He is easy to work with, extremely knowledgeable and efficient. Things get done and he will make sure that you understand every part of the process. I interviewed several other people and he was hands down.....The only choice.

google
Mike Hoeffner
August 30, 2022

Doing a Reverse Mortgage is a major decision, when working with Bruce he came out personally to go over every thing in detail, there was no pressure to finalize the transaction, I had even put the loan on hold for awhile even though I had locked in my rate, I had called Bruce off and on for a few weeks to ask questions that I had concerns about and he was always available to talk to me. In the end it gave me time to feel comfortable about my decision to move forward with the Reverse. Bruce was very pleasant to work with and would certainly recommend Bruce if you are going to consider a Reverse Mortgage.

google
Jonathan Maiolatesi
August 22, 2022

Bruce Simmons at American Liberty is one of the best in the reverse mortgage industry. I have known and worked with him for years and he always does a great job. You are in good hands with Bruce and know that he will take good care of you or your loved ones every step of the way.

google
Ronda Giblin
August 20, 2022

Best thing I ever did! Bruce Simmons at American Liberty Mortgage is the best. He is always there to answer your questions, and can easily explain the whole idea of a Reverse Mortgage. He takes the time and goes through the entire process with you. It worked out so well for me. Thank You Bruce!

google
John Bell
August 20, 2022

We had researched Reverse Mortgages for 5 years and after hearing about Bruce Simmons and meeting with him, we finally decided to move forward with the Reverse Morgage. It has been over a year now and we are still very pleased with our decision. We think Bruce is very professional, knowledgeable and honest. Thank you, Bruce, for all your help.

google
Mary Bernard
August 19, 2022

I first met Bruce Simmons 2017. I found him on the internet. I was looking for someone local. I called him and explained I was only looking into doing a reverse mortgage, so I did not want him to think this was something I was ready to do. Bruce was friendly, very open about the basics of a reverse mortgage. Bruce came to my home and presented the figures and other details that he could offer. The first thing that impressed me was this was not a hard sell, more of a informational meeting. He was very open about all of the details, and answered my questions without hesitation. What really was evident was he was establishing a relationship with me, and I realized he knew I would not take the loan at that time. There was not enough equity in my home, and I would have to bring money to the table. Although I was not ready to do a loan, Bruce assured me he is always available for questions. Four years later, I finally did do a reverse mortgage, and I couldn't be happier with having done it. I have done away with a mortgage payment which allows me to fund my retirement account with that mortgage payment. We did some much needed landscaping with our cash out transaction, and will move on to improvements inside of the house. My reverse mortgage has a line of credit, and I feel sense security knowing it is there if I need it. Bruce explained that a reverse mortgage is not for everyone, but I feel certain that he paved the way for a strategy that worked for me. I will definitely do a refinance when the time is right. I will check in with Bruce to be sure what the benefits are when I do it again.

google
LESLIE HINES
August 19, 2022

I have worked with Bruce Simmons for 15 years. Bruce is one of the best in the industry. He is extremely knowledgeable, kinds and detailed in what he does. His clients love working with him and trust him to help them with their Reverse Mortgage loans. I would recommend Bruce to anyone I know that is thinking about or wanting to do a Reverse Mortgage. He will always take very good care of the customers and make sure their needs are met! Class act and one of the best in the industry by far!