This loan option provides an easy way to tackle projects that require a major sum of money. Funds from this loan are given as a lump sum and then the interest rate is locked in place immediately when the loan closes.
If you’ve got some outstanding mortgage balance that you cannot cover, this option might be a great idea. However, you would still have to pay insurance and property taxes of course.
Fixed-rate HECMs help to remove the uncertainty that you would encounter if you opt for an adjustable-rate. This is because right from the onset, you’re already in the know about the interest rate placed on the loan for the entire lifespan of the loan.
This implies that for the entire duration of the loan, the interest rate remains the same and this option allows only lump-sum disbursements of loan funds.
It is essential to ensure that whatever amount you would be receiving when the loan is closing would completely cover for your needs.
Typically, most people use a fixed-rate HECM for paying off mortgage balances, property liens, covering medical bills, major home repairs or renovation, or as a source of funds for day to day expenses while other assets and investments are left to appreciate in value.
The HUD places restrictions on the loan amount that a borrower would have access to when the loan is closed or in the first 12 months after the loan is closed. If a portion of the fixed-rate loan is restricted, then the borrower would have to forfeit such funds.
However, given that you would be working with an experienced lender, you should not experience this at all.