Reverse mortgages (generally known as Home Equity Conversion Mortgages, shortened to HECM) are helping elderly people in California reach better financial security and enjoy their retirement living years to the fullest extent.
The HECM FHA insured reverse mortgage can be used by senior home owners age Sixty two and older to transform the equity inside their home into a monthly flow of additional cash flow and/or a credit line to be repaid once they do not inhabit the home.
The mortgage, often called HECM, is funded by a lender for example a mortgage lender, traditional bank, credit union or savings and loan association. To help the home-owner in making a knowledgeable determination of whether this program meets their needs, they are required to receive consumer education and counseling from a HUD-approved HECM counselor.
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HECM counselors will talk about program eligibility requirements, financial implications and alternatives to receiving a HECM and specifications for the mortgage becoming due and payable. After the conclusion of HECM counseling, the home-owner should be able to make an independent, educated determination of whether or not this product will satisfy their needs.
California home owners who satisfy the eligibility criteria 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 Standards For Getting A Reverse Mortgage In stateshort:
Age 62 years of age or older
Own your own home and also have significant equity
Occupy your home as a primary residence
Taking part in a consumer information session given by an authorized 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 history qualifications 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 home or 1-4 unit home with one unit occupied by the homeowner
HUD-approved condominiums
Manufactured houses on property
Meet FHA property specifications and flood requirements
How the reverse mortgages} Program Works For California Homeowners
Property owners 62 and older which have repaid their mortgage loans or have only small loan amounts outstanding, and are currently residing in the home 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 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 conditions change can restructure their payment selections for a nominal fee of $20. Fees can vary dependant upon Loan provider.
As opposed to ordinary home equity loans, a HUD reverse mortgage does not need repayment so long as the home is the borrower’s primary residence. Loan companies recover their principal, plus interest, when the home is sold. The rest of the value of the home goes to the homeowner or to their heirs. You can’t ever owe in excess of your home’s appraisal value.
If the sales funds are insufficient to repay the balance due, HUD pays the lender the sum of the shortfall. HUD’s Federal Housing Administration (FHA) collects an insurance premium from all borrowers to supply this coverage. That is the great thing about the HUD™ FHA guarantee.
The total a homeowner may borrow is dependent on what their age is, the current interest rates, other loan charges and the appraisal vlaue of their home or FHA ‘s mortgage limits for their area, whichever is less. Generally, the more valuable your property is, the older that you are, the lower the interest rate, the more you are able to borrow.
There are not any asset or cash flow limitations on borrowers receiving HUD’s reverse home loan.
There are also no limitations on the value of houses being qualified for a HUD reverse mortgage. The value of the property is determined by an appraisal. Nevertheless, the total 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 which is 2% of the maximum claim amount that may be borrowed along with a .5% annual premium.