Reverse mortgages (often called Home Equity Conversion Mortgages, shortened to HECM) are helping elderly homeowners in California gain greater financial security and enjoy their retirement years to the fullest.
The HECM FHA insured reverse mortgage can be used by senior homeowners age 62 and older to transform the home equity inside their home to a monthly flow of additional cash flow and/or a credit line to be paid back after they no longer occupy the home.
The home loan, also known as HECM, is funded from a mortgage company such as a mortgage lender, bank, credit union or savings and loan association. To support the home owner in making an educated decision of whether the program satisfies their requirements, they’re required to get consumer education and counseling by a HUD-approved HECM counselor.
Other California Cities: Coffing, Camden, Fallbrook, Sheldon, Florin
HECM counselors will talk about program eligibility conditions, financial consequences and alternatives to obtaining a HECM and provisions for the mortgage loan becoming due and payable. After the conclusion of HECM counseling, the home owner should be able to make an independent, well informed decision of whether the product will satisfy their requirements.
California homeowners who fulfill the eligibility criteria can complete a reverse mortgage application by speaking to a FHA-approved lending institution like a bank, mortgage company, or savings and loan association.
Borrower Requirements For Getting A Reverse Mortgage In stateshort:
Age 62 years old or older
Own your property and also have sizeable home equity
Occupy your home as a primary residence
Taking part in a consumer information session offered by an authorized HECM counselor
Mortgage Amount Based On:
Age for the youngest consumer
Current interest rate
Lesser of appraisal value or the FHA insurance limit
Financial Requirements:
Income and credit requirements will be required of the applicant
No repayment provided the house is the primary residence.
Fee may be financed in the mortgage
Property 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 requirements and flood requirements
How a reverse mortgage loan in California} Program Works For California Homeowners
Homeowners 62 and older which have paid in full their house loans or have only small home loan amounts outstanding, and are presently living in the home meet the criteria to take part in HUD’s reverse mortgage program.
The loan makes it possible for home-owners to borrow on the equity in their properties. Homeowners can select 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 options for a nominal fee of $20. Fees may vary dependent on Financial institution.
Unlike ordinary home equity loans, a HUD reverse mortgage doesn’t require repayment provided the home is the borrower’s primary residence. Loan providers recover their principal, plus interest, when the home is sold. The rest of the value of the home would go to the homeowner or to their survivors. You can’t ever owe above your home’s appraised value.
If the sales proceeds are inadequate to cover the amount due, HUD pays the lending company the sum of the deficiency. HUD’s Federal Housing Administration (FHA) collects an insurance premium from all of the borrowers to supply this coverage. That is the wonderful thing about the HUD™ FHA guarantee.
The total a homeowner may borrow is dependent on their age, current interest rates, other loan costs and the appraisal of their home or FHA ‘s mortgage limits with 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 isn’t any asset or income limits on borrowers acquiring HUD’s reverse loan.
In addition there are no limits on the value of properties being qualified 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 obtain HECM mortgages. Homeowners are charged an upfront insurance premium that is 2 percent of the maximum claim amount which can be borrowed as well as a .5 percent annual premium.