Reverse mortgages (often called Home Equity Conversion Mortgages, abbreviated to HECM) are helping older homeowners in California gain an increased monetary stability and enjoy their retirement living years to the fullest.
The HECM FHA insured reverse mortgage can be utilized by senior home owners age Sixty two and older to transform the equity inside their house into a monthly stream of extra cash flow and/or a line of credit to be paid back when they do not occupy the house.
The home loan, also known as HECM, is funded by a mortgage company such as a mortgage lender, traditional bank, credit union or savings and loan association. To assist the home owner in making an educated decision of if this program fulfills their needs, they’re required to receive consumer education and counseling using a HUD-approved HECM counselor.
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HECM counselors will talk about program qualification conditions, financial implications and alternatives to obtaining a HECM and specifications for the mortgage becoming due and payable. After the conclusion of HECM counseling, the home owner will be able to make an independent, informed decision of whether this product will fulfill their needs.
California home-owners who satisfy the eligibility requirements can complete a reverse mortgage application by speaking to a FHA-approved lender such as a bank, loan company, or savings and loan association.
Borrower Requirements For Getting A Reverse Mortgage In stateshort:
Age 62 years old or older
Own your own home as well as have substantial equity
Reside in your house as a primary residence
Participation in a consumer information session provided by an authorized HECM counselor
Mortgage Amount Based On:
Age of the youngest applicant
Current interest rate
Lesser of appraisal value or the FHA insurance limit
Financial Requirements:
Income and credit rating requirements will be required of the homeowner
No repayment providing the property is the primary residence.
Costs may be financed in the mortgage
Property Requirements:
Single family home or 1-4 unit home with one unit lived in by the homeowner
HUD-approved condo properties
Manufactured homes on land
Meet FHA property specifications and flood requirements
How a reverse mortgage loan} Program Works For California Homeowners
Homeowners 62 and older that have paid off their house loans or have only small home loan balances outstanding, and are also presently living in the house meet the criteria to participate in HUD’s reverse mortgage program.
The loan enables homeowners to borrow on the equity in their properties. Homeowners can select from five payment plans:
Tenure – equal monthly payments as long as at least one borrower lives and continues to occupy the property as a principal residence.
Term – equal monthly paymentsfor 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 payments for as long as the borrower remains in the home.
Modified Term – combination of line of credit with monthly payments for a fixed period of months selected by the borrower.
Homeowners whose circumstances change can restructure their payment options for a nominal fee of $20. Fees may vary dependent on Financial institution.
As opposed to standard home equity loans, a HUD reverse mortgage does not require repayment providing the house is the borrower’s primary residence. Mortgage lenders regain their principal, plus interest, once the house is sold. The rest of the value of the house would go to the homeowner or to their survivors. You can’t ever owe greater than your house’s appraised value.
If the sales proceeds are not sufficient to repay the balance due, HUD pays the lender the amount of the deficiency. HUD’s Federal Housing Administration (FHA) collects an insurance premium from all of the borrowers to supply this coverage. That is the wonderful thing about the HUD™ FHA guarantee.
The amount of money a homeowner could borrow is dependent on how old they are, current interest rates, other loan costs and the appraised value of their house or FHA ‘s mortgage limits for their area, whichever is less. Generally, the more valuable your property is, the older that you are, the lower the interest, the more you’ll be able to borrow.
There aren’t any asset or cash flow limits on borrowers obtaining HUD’s reverse house loan.
In addition there are no limitations on the value of properties being qualified for a HUD reverse mortgage. The value of the property is determined by an appraisal. Nonetheless, the total which can be borrowed is derived from the lesser of the appraisal amount or FHA mortgage limit, which is $675,750.
HUD collects funds from insurance premiums charged to the homeowners who get HECM mortgages. Homeowners are charged an upfront insurance premium which is 2% of the maximum claim amount which may be borrowed and then a .5 percent annual premium.