Want to Cover Home Repairs for Life? Consider a HECM
By Tyler Plack
Tyler Plack is the President of South River Mortgage. Tyler holds an active FHA Direct Endorsement (DE) underwriting certification and is the author of The Retirement Solution: Maximizing Your BenefitTyler is a seasoned entrepreneur and real estate investor renowned for his expertise in reverse mortgages and his commitment to addressing seniors' equity challenges. Tyler brings a unique perspective to his ventures, having built several successful companies throughout his career. His insights are frequently sought by industry publications, where he is recognized for his vast knowledge in the realm of reverse mortgages.
An avid investor in income-producing properties, Tyler is dedicated to helping seniors navigate their financial needs with compassion and expertise. When Tyler is not helping solve America's retirement crisis, he is a skilled pilot flying airplanes for fun.
Your home has served as your sanctuary for years. If you’re an older adult who intends to stay in your home for the rest of your life, it’s important to keep it in good repair.
Home repairs (and essential upgrades like replacement HVAC units) can be costly, and you might understandably be concerned about funding them during retirement. A home equity conversion mortgage (HECM) offers one way to cover costs.
What Is a HECM?
If you’re an older homeowner, you’ve likely built substantial equity in your home over the years. If you are retired or living on a fixed income, you might wish that you could tap into some of that equity to fund everyday expenses, including essential repairs.
Borrowing against that equity is easier than you may think. Many seniors choose to take out a reverse mortgage, and the most common type of reverse mortgage is a home equity conversion mortgage (HECM).
With a traditional mortgage, you make monthly payments that gradually decrease the loan balance over time. With a HECM, the lender sends you monthly payments (or a lump sum), and each payment increases the loan balance.
The loan balance comes due when one of the following happens:
- You pass away
- You sell the home
- You move out of the home
After your death, your heirs may sell your home to pay off the loan balance. If they prefer to keep the home, they may pay the balance themselves.
How a HECM Can Help with Home Repairs and Upgrades
When you have a HECM, you don’t have to make monthly payments like you would with a traditional mortgage. As long as you uphold your end of the loan terms — like paying your property taxes and maintaining homeowners’ insurance — you’ll continue to receive payments from the lender.
A HECM doesn’t restrict how you use the funds from your reverse mortgage. You may find that the money helps you afford key repairs and upgrades like these:
Plumbing Upgrades
Whether your home has its own septic system or connects to the city sewer, pipes can wear out, break, or become inefficient. This can lead to backups when you least expect them.
Upgrading your plumbing can be costly, but it can prevent serious problems down the line. It also grants you the peace of mind that only comes with knowing that you (probably) won’t encounter a sudden sewage overflow.
Replacement Appliances
Most home appliances last about 10 to 15 years, so you may find yourself buying a new stove, fridge, washer, and dryer over time. Whether you choose to replace appliances as they wear out or update them all at once, a HECM makes replacement significantly easier.
Age-Related Modifications
If you start to experience mobility challenges, you might decide to outfit your home with a stair lift, grab bars, wheelchair ramps, and other modifications. These can quickly become very costly.
Electrical Updates
Older homes tend to experience electrical issues over time. These problems aren’t just inconvenient — they can also be dangerous. Smaller repairs often aren’t terribly expensive, but if your entire home needs to be rewired, you may owe upwards of $10,000.
Roof Repairs or Replacements
Roofs don’t last forever, and most homes will need periodic roof repairs. However, if your roof has multiple issues or the cost of repairs is approaching that of a new roof, it might be time to consider replacement.
Who Qualifies for a HECM?
If you are aiming to age in place, a HECM can be an attractive option. However, it may not be the right option in every circumstance. These are some of the key qualifications:
- Be 62 or older
- Own your home outright or have significant equity
- Keep the home as your primary residence
- Meet credit and income requirements
- Continue to pay property taxes, insurance, and other costs of homeownership
- Be free of delinquent federal debt (like unpaid taxes)
You must also complete loan counseling with an agency approved by the U.S. Department of Housing and Urban Development (HUD).
Not Sure Whether a HECM Is Right for You?
Making the right financial moves is critical for building a peaceful, secure retirement. The South River Mortgage team can discuss your situation and help you decide whether a HECM might provide the future you need. Get in touch today to learn more!
