What is a Flex Payment Mortgage?

Today, many older homeowners want the freedom to choose where to live and how to best manage their finances. If this strikes a chord with you, Guild’s Flex Payment Mortgage may be a solution worth considering. It’s a suite of services that combines federally insured Home Equity Conversion Mortgages (HECMs) with options for larger loan amounts as well as HECMs for purchase. With the Flex Payment Mortgage, you’re empowered to draw funds from the equity you’ve built over the years without having to sell your home.

According to a survey by US News and World Report, 95% of people 55+ view aging in place as an important goal. If you’re 62 or older, a Flex Payment Mortgage can make this possible. It may help you:

• Pay off the rest of your mortgage
• Supplement living expenses
• Pay for lifestyle improvements or renovations
• Stay closer to your family and community

When it comes time to receive your tax-free Flex Payment funds, you can choose the option that best suits your needs:

Lump sum: This is especially beneficial if you have a large expense (like your mortgage or medical bills) that needs to be paid all at once.

Line of credit: Access the money as you need it. For example, if you want to have funds available for future expenses but don’t need the cash right now, this flexible option lets you draw funds as necessary.

Monthly payments: If you need extra income to cover your monthly living expenses, you can set up regular payments to supplement your retirement income.

You may also choose a combination of the above to suit your changing needs or switch your preferences at any time. Speak to your Guild loan officer for guidance.

With a Flex Payment Mortgage, you can continue living in your home without making payments on your loan as long as you comply with the Flex Payment Mortgage terms described below. Or you may choose to make voluntary payments to minimize the accumulating interest or to reduce the overall loan balance, potentially leaving more equity in the home for your heirs.

Like all borrowing agreements, at some point your Flex Payment Mortgage will need to be settled. Generally, this happens when:

1. Your home is sold: In this case, the proceeds from the sale will be used to repay your loan.
2. You move out: If you’re gone for more than 12 consecutive months (for example, you move into assisted living or a nursing home), your loan becomes due. Often the home is sold at this point to cover it.
3. You fail to meet the obligations: If you can’t keep up with the financial responsibilities of the loan described below, the lender can call the loan due.
4. You pass away: The loan must be repaid when the last surviving borrower dies. This can be done by selling the home or, if your heirs wish to keep the property, through other means.

At the time of repayment, if the home’s sale price is more than the loan balance, the remaining equity goes to you or your heirs. On the other hand, if the sale price is less than the loan balance, neither you nor your heirs are financially responsible for the shortfall because the Federal Housing Administration (FHA) insures all HECMs.

If you’re an empty nester taking stock of your space, you may realize your home no longer suits your lifestyle. When you’re ready to redefine your homeownership needs, HECMs for purchase can help you get into a new, more appropriate home. Here’s how it works:

1. Use the proceeds from the sale of your current home (or other savings) to make a down payment on your new home. Your Flex Payment Home Equity Conversion Mortgage covers the remaining balance of the purchase price.
2. With the flexible payment feature, you can choose to repay as much as you want or make no monthly principal and interest payments.
3. Move into your new home without having to make monthly mortgage payments.

It is true that HECMs may reduce the inheritance of your heirs. If you’re considering a Flex Payment Home Equity Conversion Mortgage, you may want to have a frank conversation with them about what happens to your property after you’re gone. Leaving a home to your loved ones can sometimes be more of a liability than a legacy, as it may burden them with unwanted maintenance costs or property taxes. Deciding which descendant to leave it to can also be tricky. It’s always important to carefully consider if HECMs align with your financial goals and those of your heirs before taking out a Flex Payment Home Equity Conversion Mortgage. You may find they would rather have you be financially comfortable than to have your house.

With Flex Payment Mortgages, you don’t have to make mortgage payments while you’re living in the home, but you still have financial responsibilities, such as:

1. Property taxes: You must continue to pay property taxes. Failure to do so can result in defaulting on the Flex Payment Mortgage.
2. Homeowners insurance: Maintaining an active homeowners insurance policy is mandatory to protect the property.
3. Homeowners Association (HOA) fees: If the home is part of an HOA you’ll need to continue to pay these fees.
4. Maintenance and repairs: You’re responsible for keeping the home in good condition. Neglecting necessary repairs such as a leaky roof or cracked foundation can lead to default.

It’s wise to set aside some money every month to keep up with these vital obligations.