Reverse Mortgage Loans

Home Equity Conversion Mortgage

If you are a home owner aged 62 or over, reverse mortgage loans are designed for you to get the best out of your home equity. The most common reverse mortgage loan is Home Equity Conversion Mortgage or HECM. Like a regular mortgage loan, the property is what secures the loan and the title is in the buyer’s name.

HECM vs Traditional Mortgage

The difference between a HECM loan and a traditional mortgage loan, apart from the borrower’s age, is that the home equity decreases. Added to this, there are no monthly mortgage payments. This doesn’t mean that the loan is free of charge. The strategy used for repayments is different, that’s all. Any outstanding amount owed is paid back when the home owner moves out of the property or passed away.

Paying Off HECM Loan

Like any other type of loan, HECM loan will incur interest. It will also incur monthly charges such as loan fees, tax and insurance. Charges accumulate into a final sum, rather than being invoice every month. When the home buyer moves out or passes away, the balance owed is paid off by the lender or heirs.

Reverse Mortgage – Upside And Downside

Reverse mortgages have an upside and a downside. One of the benefits is that you get to use up the equity of your home – no monthly rent payments. But a downside to reverse mortgages is that if there isn’t enough money to pay off the outstanding amount owed to your mortgage lender, your heirs will struggle to pay back the loan. Another upside is your right of rescission, which means you are able to change your mind without being penalised. You have 3 business days to cancel the loan application.

If you have any issues or concerns in relation to reverse mortgage loans, please give us a call for a no commitment consultation with one of our property solicitors. SG

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