Home Equity Conversion Mortgage (HECM) allows one to obtain money by cashing in on the equity of homes they own. This is possible if you own a home and you are over 62 years of age. Other requirements to obtaining the reverse mortgage are:
- You should have cleared your mortgage
- You should be and remain the occupant of the home you want to cash in on.
- You should not be a bankruptcy victim
Financial Ramifications
There are several fees that will need to be taken care of. However these costs can be added to the mortgage cost. During the entire life of the reverse mortgage you will be receiving the money you want from the lender. You do not need to make any repayment until you die or decide to move out of the home.
Calculating Loan Amount
Reverse mortgage loan amount can be calculated based on:
Fixed Rate
This is a preset rate by many lenders. Loans that take longer period with eventually have more interest than those repaid in a shorter period. When taking a reverse mortgage, experts advise that this is the best way to calculate your mortgage rate. This type is not affected by factors that may affect interest rates during the life of your loan.
Variable Rates
This is different from the previous method of calculation as the rate changes from time to time. Depending on various factors, lenders keep varying their rates. Some lenders may revise quarterly, annually or even bi annually. There is a rule in the mortgage industry that a lender should not revise the variable rates twice during one period. This helps although after a long period you will notice that the loan rate will have changed a lot due to the fluctuations in the rates.
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