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A Home Equity Conversion Mortgage Line of Credit (HECM LOC) is similar to a traditional Home Equity Line of Credit (HELOC). They are both a line of credit secured against your home. Some differences are however making the HECM Line of Credit an increasingly popular choice.
Where traditional HELOCs are subject to being decreased or even closed altogether, the HECM Line of Credit will stay open and available for whenever it might be needed.
One of the most attractive features on the HECM Line of Credit is that re-payment is required only after the last borrower leaves the home, providing the borrower complies with all loan terms such as continuing to pay taxes and insurance.
A traditional HELOC requires monthly payments be made including principle and interest upon accessing funds. The HECM Line of Credit gives you financial flexibility. You owe interest only on the amount you actually borrow and monthly payback is not required.
With the HECM, the unused line of credit grows* at current expected interest rates; therefore, taking a HECM at age 62 gives your Line of Credit time to grow. This is especially relevant if the Reverse Mortgage interest rates are expected to increase over time.
Increasingly, some financial writers and advisors are suggesting that homeowners establish a Line of Credit through the HECM program whether they need the money immediately or not. They point to the flexibility in how the Line of Credit can be used as a need arises. We recommend that you consult with your individual trusted tax professional or financial advisor for advice.
Shelley Giordano, chairwoman of the Funding Longevity Task Force, suggests setting up a Reverse Mortgage Line of Credit as a way of protecting retirement funds from fluctuations in the financial markets:
“Homeowners may be able to borrow funds as needed through the line of credit rather than withdrawing money from their investment portfolios. The FHA program means your line will never be cancelled or closed if you keep your Reverse mortgage in good standing.”
“The HECM line of credit may also be used as a source of income for those who want to delay applying for Social Security benefits and so increase their monthly payout when they do start taking benefits,” Ms. Giordano says. “After you apply for Social Security, you can stop taking money from the line of credit and, if you want, pay the loan back.“
“The month after my 62nd birthday we opened a HECM Line of Credit on our Financial Planners advice. The team at United Northern were both friendly & knowledgeable, it feels great to have a plan in place!”
Michael B. – California
Contact Senior Security Advisors to learn about a HECM Line of Credit account and to ask them any questions you may have. Deciding on the right loan options for you depends on your individual situation.
*Line of Credit Growth – The unused portion of the line of credit grows at the “credit line growth rate,” which is equal to the compounding rate. This is the same rate at which the principal limit and the loan balance grow, which is the current interest rate plus 0.5 percent. Therefore, the amount of funds available to the borrower from a line of credit grows larger each month for as long as any funds remain.