Reverse mortgages (known as Home Equity Conversion Mortgages, abbreviated to HECM) are aiding elderly people in California obtain an increased economical security and enjoy their retirement years to the fullest extent.
The HECM FHA insured reverse mortgage can be used by senior property owners age 62 and older to convert the home equity in their property to a monthly flow of extra cashflow and/or a line of credit to be paid back once they no longer occupy the property.
The mortgage loan, often called HECM, is funded by a loan company such as a mortgage lender, traditional bank, credit union or savings and loan association. To assist the homeowner in making an informed decision of whether the program meets their requirements, they are required to receive consumer education and counseling using a HUD-approved HECM counselor.
Other California Cities: Webster, El Macero, Rancho Yolo Mobile Home Park, Royal Oak Manufactured Home Community, Davis Mobile Estates
HECM counselors will talk about program qualification conditions, financial implications and alternatives to receiving a HECM and specifications for the mortgage loan becoming due and payable. After the completion of HECM counseling, the homeowner will be able to make an independent, informed decision of whether or not this product will fulfill their requirements.
California home-owners who fulfill the eligibility criteria can complete a reverse mortgage application by contacting a FHA-approved lender such as a bank, loan company, or savings and loan association.
Borrower Criteria In Order To Get A Reverse Mortgage In stateshort:
Age 62 years old or older
Own your own home and also have considerable home equity
Occupy your house as a primary residence
Taking part in a consumer information session offered by an approved HECM counselor
Mortgage Amount Based On:
Age for the youngest borrower
Current interest rate
Lesser of appraisal value or the FHA insurance limit
Financial Requirements:
Income and credit history requirements will be required of the borrower
No repayment providing the house is the primary residence.
Closing costs may be financed in the mortgage
Real Estate Requirements:
Single family home or 1-4 unit home with one unit occupied by the homeowner
HUD-approved condos
Manufactured houses on land
Meet FHA property conditions and flood requirements
How a HECM in California} Program Works For California Homeowners
Home-owners 62 and older that have paid off their mortgages or have only small mortgage balances outstanding, and are also presently residing in the property meet the requirements to take part in HUD’s reverse mortgage program.
The loan allows home owners to borrow on 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 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 company.
Contrary to normal home equity loans, a HUD reverse mortgage does not need repayment provided the property is the borrower’s principal residence. Loan companies regain their principal, plus interest, whenever the property is sold. The remainder of the value of the property would go to the homeowner or to their heirs. You’re never going to owe more than your property’s appraised value.
If the sales funds are not enough to cover the total amount payable, HUD will pay the lending company the amount of the deficiency. 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 amount of money a homeowner may borrow is dependent on their age, current interest rates, other loan charges and the appraisal vlaue of their property or FHA ‘s mortgage limits for their area, whichever is less. Typically, 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 cash flow limits on borrowers obtaining HUD’s reverse mortgage.
There are also no limitations on the value of homes qualifying for a HUD reverse mortgage. The value of the property will be determined by an appraisal. Nonetheless, the amount which can 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 that is 2% of the maximum claim amount that could be borrowed and then a .5% annual premium.