Age matters when taking out HECM credit line

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Editor's note: This is the fourth in a multipart series. Read Part 1, Part 2 and Part 3. One of the valuable features of the Home Equity Conversion Mortgage (HECM) is the multiple options for cashing out equity in the house. Borrowers can take cash, a credit line that grows in size if it is not used, a tenure annuity that pays a monthly stipend for as long as the senior lives in the house, and term annuities that pay a monthly stipend for a period selected by the senior. These options allow HECMs to be used for a variety of purposes, some of which were discussed last week. Some more are considered here. Invest to generate income With few exceptions, using a HECM to finance investments is a bad idea. The cost of funds is the HECM interest rate plus the FHA mortgage insurance premium. In August 2012, this was over 5 percent. To make money, the senior has to earn a return on investment above the cost, which in today's market is generally not possible except by purchasing finan...