Reverse Mortgage Success Story: Using an HECM Credit Line for Financial Security

March 21, 2024
How a Home Equity Conversion Mortgage (HECM) helped a senior couple establish a line of credit for future emergencies and to protect themselves against market volatility. 

Reverse mortgages can be a helpful resource for seniors who want to create a stable financial situation in their retirement years. Here’s another example of how a reverse mortgage benefitted a senior homeowner.

The situation:

  •  Jay and Melissa (both age 65) own their home (worth $700,000) free and clear.
  • Their income consists of Social Security and distributions from their retirement accounts.
  • They are looking for added financial security to protect themselves in the future.

The solution:

The benefits:

  •  Monthly principal and interest mortgage payments are not required — providing financial flexibility.
  • The line of credit grows at the same interest rate as Jay and Melissa’s loan balance.
  • They can draw on their credit line for major expenses, like car repairs or replacement, medical bills, home repairs or upgrades, or to help their children and/or grandchildren.
  • They can increase the returns on their investment portfolio with a more aggressive mix strategy.
  • They can reduce their tax obligation by minimizing distributions from retirements accounts and supplementing with tax-free funds from their credit line.
  • The loan doesn’t have to be repaid until they sell the home, or they both move out or pass away; and once the loan is repaid, any remaining equity goes to Jay and Melissa or their beneficiaries.
  • If the loan balance exceeds the property value, there is no debt obligation for Jay, Melissa, or their beneficiaries (the home can be sold for 95% of current fair market value).

At Waterstone Mortgage, we help seniors explore whether a reverse mortgage is ideal for their current circumstances and long-term goals. Because reverse mortgages are unique, we take the time to answer questions, address concerns, and help our potential clients strategize for the future.

Interested in learning more? Get in touch with a trusted Reverse Mortgage Specialist at Waterstone Mortgage. It’s our goal to help senior citizens create a more financially stable and secure retirement.

These materials are not from HUD or FHA and were not approved by HUD or a government agency.

The only reverse mortgage insured by the U.S. Federal Government is called a Home Equity Conversion Mortgage (HECM), and is only available through a Federal Housing Administration (FHA)-approved lender. Not all reverse mortgages are FHA insured. When the loan is due and payable, some or all of the equity in the property that is the subject of the reverse mortgage no longer belongs to borrowers, who may need to sell the home or otherwise repay the loan with interest from other proceeds. A lender may charge an origination fee, mortgage insurance premium, closing costs and servicing fees (added to the balance of the loan). The balance of the loan grows over time and you are charged interest on the balance. Borrowers are responsible for paying property taxes, homeowner’s insurance, maintenance, and related taxes (which may be substantial). There is no escrow account for disbursements of these payments. A set-aside account can be set up to pay taxes and insurance and may be required in some cases. Borrowers must occupy home as their primary residence and pay for ongoing maintenance; otherwise the loan becomes due and payable. The loan also becomes due and payable (and the property may be subject to a tax lien, other encumbrance, or foreclosure) when the last borrower, or eligible non-borrowing surviving spouse, dies, sells the home, permanently moves out, defaults on taxes, insurance payments, or maintenance, or does not otherwise comply with the loan terms. Interest is not tax-deductible until the loan is partially or fully repaid.