How do I evaluate my home equity?

You can figure out how much equity you have in your home by subtracting the amount you owe on all loans secured by your house from its appraised value. For example, homeowner Caroline owes $140,000 on a mortgage for her home, which was recently appraised at $400,000. Her home equity is $260,000.

Who is the expert on home equity conversion mortgage?

Erika Rasure, Ph.D., is an Assistant Professor of Business and Finance at Maryville University. She is an expert in personal financial planning and practices as a financial therapist. What Is a Home Equity Conversion Mortgage (HECM)?

What’s the difference between reverse mortgage and home equity loan?

A HECM can also be considered in comparison to a home equity loan. A home equity loan is also a type of reverse mortgage since borrowers are issued a cash advance based on the equity value of mortgage collateral. A home equity loan will have standard borrowing terms including steady monthly interest payments.

When do you have to pay HECM on reverse mortgage?

With a reverse mortgage, monthly payments on the loan are optional. As long as borrowers continue to pay their property taxes and insurance and maintain the home, payment of the HECM only comes due when the borrower moves out of the home sells the home or passes away.

How is the equity in your home determined?

Sufficient equity in your home. Your home’s value plays a big role in determining how much you can borrow. To estimate the equity, subtract debts secured by your home (often this is just the mortgage) from the home’s estimated market value. The equity you need depends on the loan amount you want.

What is a home equity conversion mortgage ( HECM )?

By Investopedia Staff. A home equity conversion mortgage (HECM) is a type of Federal Housing Administration (FHA) insured reverse mortgage. Home equity conversion mortgages allow seniors to convert the equity in their home to cash.

Can a home equity line of credit be used for a second mortgage?

Make sure you’re able to pay a second mortgage on top of the mortgage you’re already paying. Plan carefully and talk to your financial adviser to see if a second mortgage makes financial sense for you. Home equity loans or second mortgages are different than a home equity line of credit (also called a HELOC).