Reverse mortgages (also known as Home Equity Conversion Mortgages, abbreviated to HECM) are aiding older home owners in California attain better personal financial security and enjoy their retirement living years to the fullest extent.
The HECM FHA insured reverse mortgage may be used by senior home-owners age 62 and older to convert the equity inside their home into a monthly flow of additional cashflow and/or a line of credit to be paid back once they no longer occupy the home.
The mortgage, commonly known as HECM, is funded from a lending institution like a mortgage lender, traditional bank, credit union or savings and loan association. To assist the home-owner in making a knowledgeable determination of if the program suits their needs, they’re required to get consumer education and counseling from a HUD-approved HECM counselor.
Other California Cities: Arcade, Riverside Sacramento, Freeport, Cordova, Pollock
HECM counselors will discuss program eligibility conditions, financial consequences and alternatives to getting a HECM and provisions for the house loan becoming due and payable. After the conclusion of HECM counseling, the home-owner will be able to make an independent, educated determination of whether the product will fulfill their needs.
California home owners who meet the eligibility requirements 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 as well as have substantial equity
Occupy your property as a principal residence
Participation in a consumer information session offered by an authorized HECM counselor
Mortgage Amount Based On:
Age of the youngest borrower
Current mortgage rate
Lesser of appraised value or the FHA insurance limit
Financial Requirements:
Income and credit rating requirements are required of the borrower
No repayment so long as the home is the principal residence.
Costs may be financed in the mortgage
Real Estate Requirements:
Single family house or 1-4 unit house with one unit lived in by the homeowner
HUD-approved condo properties
Manufactured homes on land
Meet FHA property guidelines and flood requirements
How the reverse home loan in California} Program Works For California Homeowners
Homeowners 62 and older who have paid in full their home loans or have only small loan amounts remaining, and are also currently living in the home are eligible to take part in HUD’s reverse mortgage program.
The loan enables home-owners to borrow against the equity in their properties. 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 depending on Lender.
In contrast to standard home equity loans, a HUD reverse mortgage does not require repayment provided that the home is the borrower’s primary residence. Lenders regain their principal, plus interest, once the home is sold. The remainder of the value of the home goes to the homeowner or to his or her survivors. You can’t ever owe greater than your home’s appraisal value.
If the sales funds are insufficient to cover the balance owed, HUD pays off the lender the amount of the deficiency. HUD’s Federal Housing Administration (FHA) collects an insurance premium from all of the homeowners to provide this coverage. That is the wonderful thing about the HUD™ FHA guarantee.
The total amount a homeowner could borrow depends on how old they are, current interest rate, other loan fees and the appraisal vlaue of their home or FHA ‘s mortgage limits with their area, whichever is less. Normally, the more valuable your house is, the older that you are, the lower the interest, the more you could borrow.
There isn’t any asset or cash flow limitations on homeowners receiving HUD’s reverse mortgage.
Additionally, there are no limits on the value of properties qualifying for a HUD reverse mortgage. The value of the house will be determined by an appraisal. However, the total 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 home-owners who receive HECM mortgages. Homeowners are charged an upfront insurance premium that is 2% of the maximum claim amount that may be borrowed plus a .5% annual premium.