Reverse mortgages (generally known as Home Equity Conversion Mortgages, abbreviated to HECM) are assisting older people in California gain better financial stability and enjoy their retirement living years to the fullest extent.
The HECM FHA insured reverse mortgage can be utilized by senior property owners age 62 and older to convert the equity in their house into a monthly stream of extra cash flow and/or a line of credit to be repaid once they cease to live in the house.
The loan, typically referred to as HECM, is funded by a lending institution for example a mortgage lender, bank, credit union or savings and loan association. To support the home-owner in making a knowledgeable decision of whether this program meets their needs, they are required to receive consumer education and counseling by a HUD-approved HECM counselor.
Other California Cities: Willow Point, Central, Clarksburg, Greendale, Hood
HECM counselors will discuss program eligibility requirements, financial implications and alternatives to receiving a HECM and provisions for the mortgage loan becoming due and payable. Upon the completion of HECM counseling, the home-owner must be able to make an independent, educated decision of whether or not this product will meet their needs.
California home owners who fulfill the eligibility requirements can complete a reverse mortgage application by getting in contact with a FHA-approved lender like a bank, loan company, or savings and loan association.
Borrower Requirements For Getting A Reverse Mortgage In stateshort:
Age 62 years of age or older
Own your home and also have considerable equity
Live in your property as a principal residence
Taking part in a consumer information session provided by an authorized HECM counselor
Mortgage Amount Based On:
Age of the youngest borrower
Current mortgage rate
Lesser of appraisal value or the FHA insurance limit
Financial Requirements:
Income and credit qualifications are required of the applicant
No repayment so long as the home is the principal residence.
Mortgage Fees may be financed in the mortgage
Real Estate Requirements:
Single family house or 1-4 unit house with one unit occupied by the homeowner
HUD-approved condos
Manufactured homes on property
Meet FHA property guidelines and flood requirements
How the Home Equity Conversion Mortgage in California} Program Works For California Homeowners
Homeowners 62 and older who have paid off their mortgage loans or have only small loan amounts outstanding, and are currently residing in the house are eligible to take part in HUD’s reverse mortgage loan.
The loan permits homeowners to borrow on the equity in their homes. Homeowners can choose from five payment plans:
Tenure – equal monthly installments as long as at least one borrower lives and continues to occupy the property as a principal residence.
Term – equal monthly installmentsfor a fixed period of months selected.
Line of Credit – unscheduled payments or in installments, at times and in amount of borrower’s choosing until the line of credit is exhausted.
Modified Tenure – combination of line of credit with monthly installments for as long as the borrower remains in the home.
Modified Term – combination of line of credit with monthly installments for a fixed period of months selected by the borrower.
Homeowners whose situations change can restructure their payment options for a nominal fee of $20. Fees can vary dependant upon Loan company.
Unlike normal home equity loans, a HUD reverse mortgage does not require repayment so long as the house is the borrower’s principal residence. Mortgage companies recover their principal, plus interest, whenever the house is sold. The remaining value of the house would go to the homeowner or to his or her heirs. You’re never going to owe in excess of your house’s appraised value.
If the sales proceeds are insufficient to pay the amount payable, HUD pays off the lender the sum of the shortfall. HUD’s Federal Housing Administration (FHA) collects an insurance premium from all homeowners to supply this coverage. This is the beauty of the HUD™ FHA guarantee.
The amount of money a homeowner may borrow is dependent on their age, the current interest rate, other loan fees and the appraisal vlaue of their house or FHA ‘s mortgage limits for their area, whichever is less. Normally, the more valuable your property is, the older that you are, the lower the interest rate, the more you can borrow.
There aren’t any asset or income limitations on homeowners receiving HUD’s reverse house loan.
Additionally, there are no restrictions on the value of homes being qualified for a HUD reverse mortgage. The value of the property will be determined by an appraisal. However, the amount that could be borrowed comes from the lower of the appraisal amount or FHA mortgage limit, which is $675,750.
HUD collects funds from insurance premiums charged to the homeowners who obtain HECM mortgages. Homeowners are charged an upfront insurance premium which is 2 percent of the maximum claim amount which can be borrowed along with a .5% annual premium.