Law Office of Ryan S. Shipp, PLLC

How to benefit from HECM reverse mortgages

Florida residents who are looking to buy a home with an HECM reverse mortgage may benefit from understanding the new rules surrounding this type of loan. In the past, a buyer could reduce the mortgage insurance premium by drawing less cash. However, there is now a flat fee of 2 percent of the property's value regardless of how much cash is drawn.

Most buyers will look at which loan allows for the highest cash draw. Buyers may also want to consider whether a loan has a fixed rate or an adjustable rate. Typically, loans with adjustable rates will allow for higher cash draws than those with a fixed rate. Buyers may also run the risk of paying a higher interest rate in the future while payments may be more predictable with a fixed-rate loan. Those who choose to buy a home with a HECM reverse mortgage may need to come up with more money upfront.

In most cases, lenders will offer to finance 50 to 60 percent of the purchase price. Some people will liquidate assets to cover the remaining balance on the home. Interest rates and other loan terms may vary depending on which lender a buyer wants to use. It may be possible to learn more about loan options by going online or by talking with an individual lender.

When buying residential or commercial real estate, it may be worthwhile to consider the ability to profit from that purchase over time. Talking with a financial professional may make it easier to determine if a specific property is worth buying. An attorney may be able to assist a buyer in understanding the terms of the purchase contract. This may increase the odds that a buyer makes a deal that is in his or her best interest.

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Law Office of Ryan S. Shipp, PLLC | 814 W. Lantana Rd., Suite 1 | Lantana, Florida 33462 | Phone: (561) 699-0399 | Map & Directions