Reverse mortgages (also called Home Equity Conversion Mortgages, shortened to HECM) are aiding older home owners in California attain greater economical security and enjoy their retirement years to the fullest.
The HECM FHA insured reverse mortgage may be used by senior property owners age Sixty two and older to convert the equity inside their home to a monthly stream of extra cashflow and/or a credit line to be paid back once they no longer live in the home.
The home loan, commonly known as HECM, is funded from a lending institution for example a mortgage lender, traditional bank, credit union or savings and loan association. To support the home owner in making an educated determination of if the program suits their needs, they are required to receive consumer education and counseling by a HUD-approved HECM counselor.
Other California Cities: Fallbrook, Camden, Laguna, Vineyard, Sheldon
HECM counselors will talk about program eligibility conditions, financial consequences and alternatives to getting a HECM and specifications for the house loan becoming due and payable. After the conclusion of HECM counseling, the home owner should be able to make an independent, informed determination of whether or not the product will fulfill their needs.
California homeowners who satisfy the eligibility requirements can complete a reverse mortgage application by speaking to a FHA-approved lending institution like a bank, loan company, or savings and loan association.
Borrower Requirements When Getting A Reverse Mortgage In stateshort:
Age 62 years old or older
Own your own home and have sizeable equity
Live in your property as a principal residence
Taking part in a consumer information session offered by an approved 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 qualifications are required of the borrower
No repayment as long as the home is the principal residence.
Closing costs may be financed in the mortgage
Real Estate Requirements:
Single family house or 1-4 unit house with one unit lived in by the homeowner
HUD-approved condominiums
Manufactured houses on property
Meet FHA property guidelines and flood requirements
How the reverse mortgage lender in California} Program Works For California Homeowners
Home-owners 62 and older who have paid back their home loans or have only small home loan amounts remaining, and are also presently residing in the home meet the requirements to participate in HUD’s reverse mortgage loan.
The loan allows home-owners to borrow from the equity in their houses. Homeowners can choose 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 credit line with monthly payments for as long as the borrower remains in the home.
Modified Term – combination of credit line 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 can vary based upon Lender.
Contrary to regular home equity loans, a HUD reverse mortgage doesn’t require repayment provided the home is the borrower’s primary residence. Lenders recover their principal, plus interest, whenever the home is sold. The remainder of the value of the home goes to the homeowner or to her or his survivors. You’re never going to owe greater than your home’s appraised value.
If the sales funds are insufficient to pay the amount due, HUD pays off the lender the sum of the shortfall. HUD’s Federal Housing Administration (FHA) collects an insurance premium from all of the borrowers to supply this coverage. This is the beauty of the HUD™ FHA guarantee.
The total amount a homeowner may borrow depends upon what their age is, the current interest rate, other loan charges and the appraisal vlaue of their home or FHA ‘s mortgage limits with their area, whichever is less. Typically, the more valuable your house is, the older that you are, the lower the interest, the more you could borrow.
There are not any asset or income restrictions on borrowers receiving HUD’s reverse loan.
There’s also no limitations on the value of houses being qualified for a HUD reverse mortgage. The value of the house will be determined by an appraisal. Nevertheless, the total 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 home-owners who receive HECM mortgages. Homeowners are charged an upfront insurance premium which is 2% of the maximum claim amount which may be borrowed plus a .5 percent annual premium.