Market fluctuations can create challenges in retirement, especially when withdrawals from investment accounts are needed during downturns.*
Here’s the good news: A reverse mortgage loan may provide an additional source of funds, helping you manage cash flow without relying solely on your portfolio. You might qualify for a Home Equity Conversion Mortgage (HECM), a reverse mortgage loan insured by the FHA, designed for homeowners 62 and older.
*This content and what follows does not constitute tax and/or financial advice. Please consult a tax advisor and/or a financial professional for your specific situation.
With a HECM, you can:
- Access a percentage of your home equity as cash, fixed monthly payments or a line of credit.
- Use funds to pay off an existing mortgage, if applicable.
- Choose to make payments toward the balance (or defer repayment) while living in the home and meeting loan obligations. You must maintain the home and cover property charges such as taxes and insurance.
Additionally, you can use remaining HECM loan proceeds however you want, such as:
- Using the available line of credit as portfolio protection. For instance, you could use a reverse mortgage for cash flow during market downturns, allowing your investments to rebound while your net worth won’t necessarily decrease.
- Reducing the need to sell investments at inopportune times.
- Establishing a financial cushion.
- Funding healthcare expenses like in-home care and long-term care.
- Paying for home renovations.
The value of the HECM line of credit
A HECM line of credit offers access to funds when needed, with the unused portion potentially increasing over time. As the unused portion of the credit line increases, so does your borrowing capacity. By starting your HECM line of credit early, you can enjoy increased financial freedom later in life.
What is the difference between a HECM and a HELOC?
While traditional home equity lines of credit (HELOCs) may offer lower upfront costs, a HECM line of credit is designed specifically for older homeowners and includes features that may better align with retirement planning goals.
| Home Equity Line of Credit (HELOC) | HECM Line of Credit | |
|---|---|---|
| As an adult, is there a minimum age I need to be? | No | 62+ |
| Do the unused funds in the line of credit accrue interest? | No | No |
| Are monthly principal and/or interest mortgage payments required?1 | Yes | No1 |
| Does the unused portion of the line of credit grow over time to produce greater borrowing capacity? | No | Yes (grows at the same rate as the loan balance) |
| Is it a non-recourse loan? (Never owe more than the home is worth when it’s sold)2 | No | Yes2 |
| Are the draw periods limited? | Yes. Typically, there’s a 5- or 10-year draw period (time frame depends on product) | No |
| Are there any prepayment penalties? | Depends on product | No |
| Which product is generally easier for 62+ homeowners to qualify for? | More difficult | Easier |
| Can the line of credit be frozen, reduced or canceled based on market conditions? | Yes | No |
2There are some circumstances that will cause the loan to mature and the balance to become due and payable. Borrower is still responsible for paying property taxes and insurance and maintaining the home. Credit subject to age, property and some limited debt qualifications. Program rates, fees, terms and conditions are not available in all states and subject to change.
Strategically Integrating a Reverse Mortgage Into Retirement Planning
Why Fairway Independent Mortgage Corporation?
Fairway Independent Mortgage Corporation is a national mortgage lender with top-notch customer service.
We’re committed to providing an amazing experience – from loan application to closing, and beyond
- We’re a national, full-service lender with high customer satisfaction scores
- We’re ranked as one of the top 10 mortgage companies in America by Mortgage Executive Magazine
- As an FHA-approved lender, we can sell HECM reverse mortgages
- We’re dedicated to educating consumers, as well as their family members and other trusted advisors, on the pros and cons of reverse mortgages
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