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What to know about HECM reverse mortgages

Older Delaware residents may be interested in using a HECM reverse mortgage to purchase a house. The reverse mortgage itself will cover up to 60 percent of the purchase price, and buyers tend to liquidate assets to cover the remaining balance. There is a 2 percent mortgage insurance premium is 2 percent of the property value no matter how much cash a person draws.

Buyers may be able to choose between a fixed or adjustable rate depending on their needs. Generally speaking, an individual may be able to draw more cash if borrowing with an adjustable interest rate as opposed to a fixed one. The loan balance on an adjustable rate HECM reverse mortgage may also be lower a decade after the house is purchased. Of course, this may be because the interest rates are initially lower on a loan with an adjustable rate compared to one with a fixed-rate.

It is possible that interest rate hikes could result in the adjustable mortgage being more expensive than the one with a rate that won't change. Those who are considering a HECM reverse mortgage are encouraged to shop around for the best rate and terms. As loan terms may vary between lenders, getting multiple quotes may make it easier to find a lender that meets cash flow and estate planning needs.

When buying a property, it is important that buyers understand the contract terms being agreed to. Talking with a financial planner or attorney may make it easier for an individual to do so. Consulting with a professional may allow a buyer to determine how much a loan may cost both today and in the future. Ultimately, a buyer may increase his or her odds of finding both right home and loan to meet their needs.

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