Reverse mortgages (known as Home Equity Conversion Mortgages, abbreviated to HECM) are serving to older residents in California achieve better personal financial security and enjoy their retirement years to the fullest.
The HECM FHA insured reverse mortgage may be used by senior homeowners age Sixty two and older to convert the home equity in their home to a monthly stream of additional cash flow and/or a line of credit to be paid back when they no longer occupy the home.
The mortgage loan, commonly known as HECM, is funded by a lending institution like a mortgage lender, bank, credit union or savings and loan association. To support the home-owner in making an informed determination of if this program meets their requirements, they are required to get consumer education and counseling by a HUD-approved HECM counselor.
Other California Cities: Parkway, Cordova, Fruitridge Manor, Fruitridge Pocket, Pollock
HECM counselors will talk about program eligibility conditions, financial implications and alternatives to obtaining a HECM and specifications for the mortgage loan becoming due and payable. After the completion of HECM counseling, the home-owner must be able to make an independent, informed determination of whether or not the product will meet their requirements.
California home-owners who satisfy the eligibility requirements can complete a reverse mortgage application by speaking to a FHA-approved lender such as a bank, loan company, or savings and loan association.
Borrower Standards In Order To Get A Reverse Mortgage In stateshort:
Age 62 years of age or older
Own your own home and have significant home equity
Occupy your house as a primary residence
Participation in a consumer information session given by an authorized HECM counselor
Mortgage Amount Based On:
Age of the youngest borrower
Current interest rate
Lesser of appraisal value or the FHA insurance limit
Financial Requirements:
Income and credit rating requirements will be required of the borrower
No repayment providing the property is the primary residence.
Closing 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 condos
Manufactured houses on land
Meet FHA property specifications and flood requirements
How the reverse mortgages} Program Works For California Homeowners
Homeowners 62 and older that have paid in full their mortgages or have only small loan amounts outstanding, and are currently residing in the home are eligible to take part in HUD’s reverse mortgage loan.
The loan allows homeowners to borrow from the equity in their homes. Homeowners can choose 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 conditions change can restructure their payment options for a nominal fee of $20. Fees can vary based upon Loan company.
Contrary to regular home equity loans, a HUD reverse mortgage does not need repayment providing the home is the borrower’s primary residence. Mortgage lenders regain their principal, plus interest, once the home is sold. The remaining value of the home goes to the homeowner or to her or his heirs. You’re never going to owe greater than your home’s appraisal value.
If the sales funds are insufficient to pay the balance due, HUD pays the mortgage 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. This is the great thing about the HUD™ FHA guarantee.
The amount of money a homeowner may borrow will depend on what their age is, the current interest rate, other loan costs and the appraisal of their home or FHA ‘s mortgage limits for their area, whichever is less. Typically, the more valuable your home is, the older that you are, the lower the interest rate, the more you’re able to borrow.
There are no asset or income limitations on homeowners acquiring HUD’s reverse mortgage.
Additionally, there are no limits on the value of homes qualifying for a HUD reverse mortgage. The value of the home will be determined by an appraisal. Nonetheless, the amount that may 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 receive HECM mortgages. Homeowners are charged an upfront insurance premium that is 2 percent of the maximum claim amount which can be borrowed and then a .5 percent annual premium.