Reverse mortgages (also referred to as Home Equity Conversion Mortgages, abbreviated to HECM) are aiding older home owners in California attain improved monetary security and enjoy their retirement years to the fullest.
The HECM FHA insured reverse mortgage can be used by senior property owners age Sixty two and older to convert the equity inside their property into a monthly stream of extra cashflow and/or a line of credit to be paid back when they no longer inhabit the property.
The mortgage, often called HECM, is funded by a mortgage company like a mortgage lender, traditional bank, credit union or savings and loan association. To help the homeowner in making a knowledgeable determination of if this program suits their needs, they are required to receive consumer education and counseling by a HUD-approved HECM counselor.
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HECM counselors will discuss program eligibility conditions, financial consequences and alternatives to receiving a HECM and provisions for the mortgage becoming due and payable. Upon the conclusion of HECM counseling, the homeowner will be able to make an independent, well informed determination of whether or not this product will fulfill their needs.
California home owners who meet the eligibility criteria can complete a reverse mortgage application by speaking to a FHA-approved lender like a bank, loan company, or savings and loan association.
Borrower Requirements To Get A Reverse Mortgage In stateshort:
Age 62 years of age or older
Own your property and have considerable equity
Occupy your house as a primary residence
Taking part in a consumer information session provided by an authorized HECM counselor
Mortgage Amount Based On:
Age for the youngest applicant
Current mortgage rate
Lesser of appraisal value or the FHA insurance limit
Financial Requirements:
Income and credit history qualifications will be required of the applicant
No repayment so long as the home is the primary 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 condo properties
Manufactured homes on land
Meet FHA property standards and flood requirements
How a reverse mortgage loan} Program Works For California Homeowners
Homeowners 62 and older who have repaid their house loans or have only small mortgage balances outstanding, and are currently living in the property meet the requirements to take part in HUD’s reverse mortgage loan.
The loan allows property owners to borrow from 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 circumstances change can restructure their payment selections for a nominal fee of $20. Fees can vary dependent on Lender.
Unlike normal home equity loans, a HUD reverse mortgage doesn’t require repayment providing the property is the borrower’s primary residence. Lenders recover their principal, plus interest, once the property is sold. The rest of the value of the property would go to the homeowner or to her or his survivors. You can never owe above your property’s appraisal value.
If the sales proceeds are not sufficient to cover the balance owed, HUD will pay the mortgage lender the sum of the shortfall. HUD’s Federal Housing Administration (FHA) collects an insurance premium from all borrowers to supply this coverage. This is the wonderful thing about the HUD™ FHA guarantee.
The total a homeowner can borrow depends upon what their age is, current interest rates, other loan fees and the appraisal of their property or FHA ‘s mortgage limits for their area, whichever is less. Typically, the more valuable your house is, the older you are, the lower the rate, the more you’ll be able to borrow.
There isn’t any asset or cash flow limits on borrowers receiving HUD’s reverse house loan.
There’s also no limitations on the value of homes qualifying for a HUD reverse mortgage. The value of the house is determined by an appraisal. However, the total which can be borrowed is derived from the lower 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.