Reverse mortgages (often called Home Equity Conversion Mortgages, abbreviated to HECM) are aiding elderly home owners in California attain better monetary security and enjoy their retirement living years to the fullest extent.
The HECM FHA insured reverse mortgage could be used by senior homeowners age 62 and older to convert the equity in their house into a monthly stream of additional cashflow and/or a line of credit to be paid back once they no longer live in the house.
The mortgage loan, commonly known as HECM, is funded by a loan company for example a mortgage lender, bank, credit union or savings and loan association. To support the home owner in making a knowledgeable determination of if the program meets their needs, they’re required to receive consumer education and counseling by a HUD-approved HECM counselor.
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HECM counselors will talk about program eligibility conditions, financial consequences and alternatives to obtaining a HECM and specifications for the mortgage becoming due and payable. After the completion of HECM counseling, the home owner will be able to make an independent, educated determination of whether the product will meet their needs.
California home owners who fulfill the eligibility requirements can complete a reverse mortgage application by contacting a FHA-approved lending institution such as a bank, loan company, or savings and loan association.
Borrower Criteria For Getting A Reverse Mortgage In stateshort:
Age 62 years old or older
Own your home as well as have substantial equity
Live in your property as a principal residence
Participation in a consumer information session offered 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 borrower
No repayment so long as the property is the principal residence.
Fee 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 condominiums
Manufactured homes on property
Meet FHA property specifications and flood requirements
How a local reverse mortgage in California} Program Works For California Homeowners
Home-owners 62 and older that have paid off their mortgages or have only small mortgage amounts remaining, and are presently living in the house are eligible to participate in HUD’s reverse mortgage program.
The loan permits homeowners to borrow from the equity in their properties. Homeowners can select 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 Financial institution.
Unlike regular home equity loans, a HUD reverse mortgage does not need repayment provided that the house is the borrower’s primary residence. Financial institutions regain 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 greater than your house’s appraisal value.
If the sales funds are inadequate to cover the total payable, HUD will pay the mortgage lender the sum of the deficiency. HUD’s Federal Housing Administration (FHA) collects an insurance premium from all homeowners to provide this coverage. That is the great thing about the HUD™ FHA guarantee.
The amount of money a homeowner may borrow is determined by what their age is, the current interest rate, other loan fees and the appraised value of their house 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 interest, the more you’ll be able to borrow.
There are no asset or cash flow restrictions on homeowners obtaining HUD’s reverse home loan.
Additionally, there are no limitations on the value of properties getting qualified for a HUD reverse mortgage. The value of the house will be determined by an appraisal. Nevertheless, the amount that could be borrowed comes from the lesser of the appraisal amount or FHA mortgage limit, which is $675,750.
HUD collects funds from insurance premiums charged to the homeowners who obtain HECM mortgages. Homeowners are charged an upfront insurance premium which is 2% of the maximum claim amount which can be borrowed as well as a .5% annual premium.