Reverse mortgages (also referred to as Home Equity Conversion Mortgages, shortened to HECM) are assisting older residents in California gain additional monetary security and enjoy their retirement living years to the fullest.
The HECM FHA insured reverse mortgage could be used by senior property owners age Sixty two and older to convert the home equity in their property into a monthly flow of extra cash flow and/or a credit line to be paid back once they do not live in the property.
The loan, often called HECM, is funded from a lending institution such as a mortgage lender, traditional bank, credit union or savings and loan association. To help the home-owner in making an informed decision of if the program satisfies their needs, they are required to receive consumer education and counseling using a HUD-approved HECM counselor.
Other California Cities: Sabre City, Foothill Farms, Citrus Heights, North Highlands, Walerga
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 home-owner will be able to make an independent, well informed decision of whether or not the product will satisfy their needs.
California home owners who meet the eligibility requirements can complete a reverse mortgage application by getting in contact with a FHA-approved lending institution like a bank, mortgage 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 considerable home equity
Live in your house as a principal residence
Participation in a consumer information session provided by an authorized HECM counselor
Mortgage Amount Based On:
Age for the youngest applicant
Current interest rates
Lesser of appraisal value or the FHA insurance limit
Financial Requirements:
Income and credit rating requirements will be required of the homeowner
No repayment as long as the house is the principal residence.
Closing costs may be financed in the mortgage
Real Estate Requirements:
Single family home or 1-4 unit home with one unit lived in by the homeowner
HUD-approved condominiums
Manufactured homes on land
Meet FHA property specifications and flood requirements
How the reverse mortgage in California} Program Works For California Homeowners
Home-owners 62 and older which have paid off their house loans or have only small mortgage balances remaining, and are currently residing in the property meet the requirements to take part in HUD’s reverse mortgage program.
The loan allows home owners to borrow from the equity in their houses. 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 credit line with monthly installments for as long as the borrower remains in the home.
Modified Term – combination of credit line with monthly installments 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 may vary dependent on Loan company.
In contrast to regular home equity loans, a HUD reverse mortgage does not require repayment providing the property is the borrower’s principal residence. Loan providers regain their principal, plus interest, once the property is sold. The remainder of the value of the property would go to the homeowner or to his / her heirs. You’re never going to owe greater than your property’s appraised value.
If the sales funds are insufficient to repay the total amount due, HUD pays off the lender the amount of the shortfall. HUD’s Federal Housing Administration (FHA) collects an insurance premium from all of the homeowners to provide this coverage. That is the great thing about the HUD™ FHA guarantee.
The total amount a homeowner may borrow is dependent upon how old they are, current interest rate, other loan charges and the appraised value of their property or FHA ‘s mortgage limits for their area, whichever is less. Typically, the more valuable your property is, the older you are, the lower the interest, the more you’re able to borrow.
There aren’t any asset or cash flow limits on homeowners acquiring HUD’s reverse house loan.
In addition there are no limits on the value of houses qualifying for a HUD reverse mortgage. The value of the property is determined by an appraisal. Nonetheless, the total amount 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 home owners who get 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.