Reverse mortgages (also referred to as Home Equity Conversion Mortgages, shortened to HECM) are assisting older home owners in California reach improved personal financial stability and enjoy their retirement years to the fullest.
The HECM FHA insured reverse mortgage can be utilized by senior homeowners age 62 and older to convert the equity in their house to a monthly stream of additional cash flow and/or a credit line to be repaid after they do not live in the house.
The loan, typically referred to as HECM, is funded from a lender such as a mortgage lender, traditional bank, credit union or savings and loan association. To assist the homeowner in making a well informed determination of whether the program meets their requirements, they’re required to receive consumer education and counseling from a HUD-approved HECM counselor.
Other California Cities: Riverview, Cordova, Highland Park, Oak Park, Pollock
HECM counselors will discuss program qualification requirements, financial consequences and alternatives to obtaining a HECM and provisions for the mortgage loan becoming due and payable. After the completion of HECM counseling, the homeowner will be able to make an independent, well informed determination of whether or not this product will meet their requirements.
California home owners who satisfy the eligibility criteria can complete a reverse mortgage application by getting in touch with a FHA-approved lending institution like a bank, mortgage company, or savings and loan association.
Borrower Requirements In Order To Get A Reverse Mortgage In stateshort:
Age 62 years of age or older
Own your home and also have sizeable equity
Reside in your house as a principal residence
Participation in a consumer information session offered by an approved HECM counselor
Mortgage Amount Based On:
Age for the youngest homeowner
Current mortgage rate
Lesser of appraisal value or the FHA insurance limit
Financial Requirements:
Income and credit qualifications are required of the homeowner
No repayment so long as the house is the principal residence.
Loan Costs may be financed in the mortgage
Property Requirements:
Single family house or 1-4 unit house with one unit lived in by the borrower
HUD-approved condos
Manufactured homes on land
Meet FHA property specifications and flood requirements
How a HECM in California} Program Works For California Homeowners
Property owners 62 and older which have repaid their mortgages or have only small loan amounts remaining, and are currently living in the house are eligible to take part in HUD’s reverse mortgage program.
The loan makes it possible for home owners to borrow against the equity in their homes. 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 situations change can restructure their payment selections for a nominal fee of $20. Fees could differ dependent on Lender.
Unlike ordinary home equity loans, a HUD reverse mortgage does not need repayment providing the house is the borrower’s principal residence. Loan companies recover their principal, plus interest, whenever the house is sold. The remaining value of the house goes to the homeowner or to his / her heirs. You can never owe above your house’s appraised value.
If the sales funds are insufficient to cover the amount owed, HUD pays off the mortgage lender the sum of the shortfall. HUD’s Federal Housing Administration (FHA) collects an insurance premium from all of the homeowners to supply this coverage. That is the wonderful thing about the HUD™ FHA guarantee.
The total amount a homeowner could borrow is dependent on what their age is, the current interest rate, other loan charges and the appraisal of their house or FHA ‘s mortgage limits with their area, whichever is less. Generally, the more valuable your home is, the older you are, the lower the rate, the more you’re able to borrow.
There are not any asset or income limitations on homeowners acquiring HUD’s reverse home loan.
There are also no limitations on the value of homes being qualified for a HUD reverse mortgage. The value of the home is determined by an appraisal. Nevertheless, the amount that may 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 get HECM mortgages. Homeowners are charged an upfront insurance premium which is 2% of the maximum claim amount that may be borrowed as well as a .5 percent annual premium.