HECM loan is a type of reverse mortgages. In this type of loan the equity that you have in your home is used as collateral. So if you do not have enough equity then you cannot take out this type of loan. But if you have enough equity then you can opt for the reverse mortgages.
The HECM refers to the home equity line of credit. In this type of loan you can borrow a bigger sum of money than the amount that you can actually afford. You will be borrowing against the equity in your home. There are certain advantages as well as disadvantages in both the HECM and the reverse mortgages. So it is better to know them before taking a decision.
The main advantage with HECM is that you can get larger lump sums of money. And this is actually the main attraction. You can get the loan proceeds if you have more equity in your home. The lender will give you cash in the form of a lump sum or you can get it in any other way like through monthly installments. The other advantage with HECM is that you can use the cash in any way that you like which is not possible with the reverse mortgages.
The other advantage with HECM is that you will be able to repay the loan in a stipulated time. The time period can range from five to ten years. And when you go for the financial assessment from the lender they will ask you how much you can afford to pay back. So it is better to make a budget and stick to it.
The disadvantage with HECM is that you will be required to make monthly payments even after you have got the loan. This is because the loan proceeds will be used for paying off your monthly bills. This means that you cannot avail of the reverse mortgages till you have paid the property taxes and other charges.
So, what can you do to get the best out of HECM and reverse mortgages? Well, you can consult a chartered financial consultant who will provide you with all the details about both these types of financial products. The counselor will also help you understand the pros and cons of these products. He will also guide you in deciding whether you should go for a reverse mortgage or a HECM loan.
However, you cannot rely on the counselor blindly. You need to do some homework as well and find out more about these two options. After consulting the counselor you need to compare the pros and cons of both these products. In this process you can take the help of the internet. Visit the websites of HECM and APR as well as find out other benefits of the mortgage products. After studying the pros and cons of both the HECM loan and the proprietary reverse mortgage you should finalize and decide which one is better for you.
A mortgage is one of the best ways to finance your home equity needs. You can also borrow money for almost any purpose including education, home repairs and improvements and medical bills. This can also be done using proprietary reverse mortgages. So, it makes sense to consult a financial expert before opting for either of these products. This way you can get the best deal possible.
HECM or the Home Equity Line of Credit is generally more expensive than the proprietary reverse mortgages. However, you can get a mortgage at a lower rate of interest if you pay a higher down payment. The higher amount that you pay towards the down payment also indicates that you are a good risk to the lender. Therefore, if the lender feels that you will pay off the loan on time and in full then he will offer you a lower rate of interest. This is why people who have some form of home equity or some equity in their house prefer to take up HECM loan instead of the proprietary reverse mortgages.
On the other hand, with the help of APR or the Annual Percentage Rate you can pay off your HECM loan in a shorter period of time. Therefore, this is a good option for those who want to take their monthly payments along with a lower interest rate. However, if you feel that your income is not good enough to pay back the loan then you might consider the alternative method of paying off the loan in installments. HECM has some negative aspects as well, which you should be aware of before going for it.
There is an early repayment penalty attached to HECM loan as well as to other types of loan; hence, it is advisable to pay back the loan on or before the due date. This will reduce the amount of interest that you pay and also save some money for you in the long run. The repayment term of the HECM loan can be anywhere from two to ten years depending upon the loan amount. Therefore, it is important that you consider your reasons and the benefits versus the disadvantages of opting for a HECM loan. It is always better to discuss your situation with an expert before taking up a home loan.