Many homeowners want a lump sum of cash to take care of home improvement projects, contributions to a grandchild’s education, replacing a car or whatever. If there is an existing mortgage we must pay that off first, then you can ask for the remaining cash. HUD does set distribution rules on how much can be taken at the outset of a HECM loan. There are zero restrictions on the uses of any cash you receive! I can provide specific numbers for you.
One of the real blessings of the HECM program is the ability to receive a monthly income from equity in our home. Let your house pay you for a change! Among many other reasons, a lot of my clients are receiving dependable, government guaranteed income straight into their bank accounts on the 1st of each month to pay for medical help, housekeeping help and other necessities too plentiful to mention here. Or they are using it for fun things like travel and spoiling grandchildren! Income can be set up for a lifetime (tenure payments) of for a certain number of years (term payments).
In over 30 years of helping seniors deal with financial matters and investments, I have never seen anything like this amazing feature of the HECM program. It is not easy to understand because it sounds too good to be true. I assure you it’s not! It can be arranged so that whatever proceeds from your HECM refinance that are not used to pay off a mortgage, distributed in cash or sent out in monthly payments are placed in a line of credit. This line of credit is unlike anything you might imagine. It is nothing like the Home Equity Line of Credit (HELOC) that most people are familiar with. That makes it what I call counterintuitive and thus hard to grasp. Just a few differences: First there are no payments of interest or principal ever required. (As with all HECM products, real estate taxes, homeowner’s insurance and any HJOA or condo fees are your responsibility). The line can never be reduced, called in or reset to require much higher payments like HELOCS can and eventually all do require. No matter what the happens to the value of your home, these funds are guaranteed to you in full by the full faith and credit of the United States of America. Finally, and this is what I can’t believe is still allowed but it is, the amount of available funds in your line of credit is increasing over time! Let me show you through an amortization schedule what that could mean to you. It’s incredible!
You can begin with one of the above distribution types or any combination of the three. And consider this please: Do life and our financial needs stay the same for those of us (like me!) that are Baby Boomers and older? Of course not. Countless studies show that, for instance, between 65 and 79, 80% of us will experience a significant financial and lifestyle shock. A HECM loan with the appropriate distribution options can not only prepare us for that almost inevitable shock, it can accommodate it. You may need to begin taking a monthly payment 10 years from now but don’t need it today. Let your “too good to be true” HECM Line of Credit grow so that it can supply what you are likely to need in the future. Your plan is flexible without needing credit or re-application. Let’s talk about it!