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Eliminate the Payment on Your Existing Mortgage
Eliminate the Payment on Your Existing Mortgage

If you have a standard mortgage, the rules require that you pay it off when you take a HECM reverse mortgage. If your capacity to make the payments on your existing mortgage has been impaired by your retirement, sickness or something else, the shift to a HECM may make good sense. It replaces debt that must be repaid in monthly installments with debt that doesn’t have to be repaid until you die or move out of the house permanently.

If the balance of your existing mortgage is small relative to the total amount of cash you can draw, you retain all your options. You can use your remaining HECM borrowing power to meet any of the other needs discussed here, using any of the HECM options.

If your existing balance is so large that paying it off uses all or most of your HECM borrowing power, paying it off is the only use you can make of the HECM. You lose the ability to draw spendable cash from the HECM in later years. In that situation, you should consider an alternative strategy of delaying the HECM until the existing mortgage has been paid off out of current income. That will pay off big in the future.