For many Americans, their house is their greatest asset. They’ve spent years working to build the equity in their home and, at a certain point, it may become time to put that equity to work. Often, savings, Social Security and pensions can’t keep up with the increasing cost of living and living longer. NRMLA President and CEO Peter Bell states, “If you consider that the typical retiree household might have one or two incomes from Social Security, a modest pension and/or limited income from low-yielding fixed-income instruments, and, perhaps, a diminished 401(k) account, then home equity becomes their greatest asset and an important resource for funding their future.”
According to the Bipartisan Policy Center2, more than 70% of Americans 65 and over will require help with bathing, food preparation, dressing and medication management; whether it’s a home health aide, community-based day care or nursing facility, long-term service costs can drain retirement savings. A recent AARP3 survey found that 3 in 4 adults age 50 and older want to stay in their homes as they age, but only 46% anticipate being able to do so. That’s where home equity solutions can help.
The Home Equity Conversion Mortgage (HECM) loan is a viable tool in retirement planning. HECM loans are government-insured and have several important requirements borrowers must meet to qualify:
- They must be at least 62 years old
- They must own your home
- The home must be their primary residence
Retirees often need access to additional funds to supplement health insurance in order to cover expenses like in-home care. Many incorrectly believe that medical insurance will cover in-home or long-term care. A HECM can be the solution for retirees hoping to age in place, in the comfort of their home. Because no two situations are alike, there are several different types of HECM loans available to meet individual needs. Proceeds can be taken in a lump sum, established as a growing line of credit, received as fixed monthly payments, or a combination of these.
There are many features of HECM loans that can help those who are looking for an income supplement for a better retirement. Here are just a few!
- No monthly mortgage payments so long as the borrower continues to pay property taxes homeowner’s insurance, and home maintenance costs
- Tax-free loan proceeds can be used to cover expenses like health care or home modifications
- Staying in the home they love
You cannot lose your home under normal circumstances and so long as you pay your property taxes, homeowner’s insurance, maintenance costs and otherwise comply with the loan terms.
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Article Provided By:
American Advisors Group (AAG)