Reverse mortgages (also called Home Equity Conversion Mortgages, shortened to HECM) are assisting elderly homeowners in California attain an increased financial security and enjoy their retirement living years to the fullest.
The HECM FHA insured reverse mortgage may be used by senior homeowners age 62 and older to convert the equity inside their home to a monthly stream of additional cash flow and/or a line of credit to be paid back when they cease to occupy the home.
The mortgage loan, often called HECM, is funded from a mortgage company for example a mortgage lender, bank, credit union or savings and loan association. To support the homeowner in making an informed decision of if this program meets their needs, they’re required to get consumer education and counseling by a HUD-approved HECM counselor.
Other California Cities: Peethill, West Sacramento, West Sacramento Trailer Park, Broderick, Westwind Estates
HECM counselors will talk about program eligibility conditions, financial consequences and alternatives to receiving a HECM and specifications for the home loan becoming due and payable. After the conclusion of HECM counseling, the homeowner must be able to make an independent, informed decision of whether the product will satisfy their needs.
California home-owners who meet the eligibility criteria can complete a reverse mortgage application by speaking to a FHA-approved lending institution like a bank, mortgage company, or savings and loan association.
Borrower Specifications For Getting A Reverse Mortgage In stateshort:
Age 62 years of age or older
Own your own home and also have sizeable equity
Reside in your house as a principal residence
Participation in a consumer information session given by an authorized HECM counselor
Mortgage Amount Based On:
Age of the youngest borrower
Current interest rate
Lesser of appraised value or the FHA insurance limit
Financial Requirements:
Income and credit history requirements will be required of the applicant
No repayment as long as the home is the principal residence.
Mortgage Fees may be financed in the mortgage
Property Requirements:
Single family home or 1-4 unit home with one unit occupied by the homeowner
HUD-approved condominiums
Manufactured homes on property
Meet FHA property specifications and flood requirements
How the reverse mortgage in California} Program Works For California Homeowners
Homeowners 62 and older that have paid back their home loans or have only small mortgage amounts outstanding, and are also presently living in the home meet the requirements to take part in HUD’s reverse mortgage loan.
The loan enables property owners to borrow on the equity in their homes. 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 selections for a nominal fee of $20. Fees can vary based upon Loan provider.
Unlike normal home equity loans, a HUD reverse mortgage does not require repayment provided the home is the borrower’s principal residence. Loan providers regain their principal, plus interest, once the home is sold. The remainder of the value of the home goes to the homeowner or to their heirs. You can never owe above your home’s appraisal value.
If the sales funds are inadequate to repay the amount payable, HUD pays the lender the sum of the shortfall. HUD’s Federal Housing Administration (FHA) collects an insurance premium from all borrowers to provide this coverage. That is the wonderful thing about the HUD™ FHA guarantee.
The amount of money a homeowner could borrow is dependent on what their age is, the current interest rate, other loan costs and the appraisal vlaue of their home 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 rate, the more you could borrow.
There aren’t any asset or income limits on borrowers obtaining HUD’s reverse house loan.
There’s also no restrictions on the value of homes getting qualified for a HUD reverse mortgage. The value of the property is determined by an appraisal. However, the amount that could be borrowed comes from the lesser of the appraisal amount or FHA mortgage limit, which is $675,750.
HUD collects funds from insurance premiums charged to the property owners who receive HECM mortgages. Homeowners are charged an upfront insurance premium that is 2 percent of the maximum claim amount which may be borrowed and then a .5 percent annual premium.