You’re at your friend's newly remodeled home and all you can feel is jealousy. We’ve all been there… They have the kitchen you’ve always wanted, their floors are stunning, their fireplace is out of this world, and you can’t even formulate words for their bathroom. House FOMO (fear of missing out) is real and you’ve just experienced it.
Afterwards you go home, pour a glass of wine and start imagining what your home would look like if you had the means to remodel. Well, remodeling your home might not be as far fetched as you’d think. You might even be sitting on some equity in your home that you didn’t realize you had. And guess what, you can use it!
We sat down with our good friend and Licensed Mortgage Lender, Ann Coughenour of Cornerstone Home Lending, Inc., to understand options that homeowners may have when using the equity in their home to finance their remodel. This product is flexible and is often easier to qualify for than a HELOC or traditional mortgage.
One of the products we learned about was a Home Equity Conversion Mortgage, or (HECM). Ann shared that this loan is specifically designed for individuals 62 years of age or older who have built equity in the home. This loan is a reverse mortgage. But before you start jumping back to the era of “scary reverse mortgages,” hear us out. Since the HECM was introduced in the 1980’s, the product has gone through several iterations in order to land on the great product we have today. Work went into creating a product meant to help people in retirement. So, what exactly makes this product great? Several things, actually.
To start, let’s do a quick definition. According to hud.gov, HECM (Home Equity Conversion Mortgage) is the “FHA’s reverse mortgage program which enables you to withdraw some of the equity in your home. You choose how you want to withdraw your funds, whether in a fixed monthly amount or a line of credit or a combination of both. You can also use a HECM to purchase a primary residence if you are able to use cash on hand to pay the difference between the HECM proceeds and the sales price plus closing costs for the property you are purchasing.”
They further state eligibility for a HECM - “You must be 62+ years or older, own the property outright or have a small mortgage balance, occupy the property as your principal residence, not delinquent on any federal debt, and participate in a consumer information session given by an approved HECM counselor.”
Coughenour added, “Additional benefits to this product are the fact that a HECM LOC can’t be taken away and it can actually grow. The growth is often higher than any other saving options available today.” She also notes it is also a non-recourse loan. That means if home values plummet and you become upside down on your mortgage, you do not have to repay that negative amount back. This benefit is secured throughout the life of the loan as long as the borrowers continue to pay the property taxes, insurance, and HOA dues on the home, maintain the home, and reside in the home as their primary residence. Additionally, as a borrower, you can keep dipping into your line of credit all while the amount owed is added to your loan with no payment required. There is no prepayment penalty. Coughenour also says that this allows a borrower to utilize their equity more intelligently while making their money work for them.
It sounds like it might be too good to be true. But Coughenour said, “This product really depends on what is right for the client. A lot of work and protections for the borrowers, their heirs, and non-borrowing spouses have been added to this product making it a fantastic option for the right borrower. And if it’s not the right product, or you don’t qualify, we have other options that will work for you. Gone are the days of bad reverse mortgages.” Coughenour works on a case-by-case basis always providing several options to her clients. And while this product (HECM) is incredible, it might not work for everyone. Coughenour takes the time to build a relationship with her clients and put them in the right product for their future situation. She reviews scenarios and gets to know her client’s situation to make sure that the HECM product will work for them.
Are you ready to discuss your opportunity with a HECM or other home equity options when remodeling your home? Please contact Ann Coughenour below!
Now take that house “FOMO” and turn it into ACTION! Contact us today to start your pre-construction services and we’ll help you along the way by getting you in touch with the right people to finance your home remodeling project. Let’s renew your life by renewing your home! Contact us below:
* Always consult your tax professional to ensure this product is right for your specific situation.
