Reverse mortgages (also called Home Equity Conversion Mortgages, abbreviated to HECM) are assisting older residents in California attain improved personal financial stability and enjoy their retirement years to the fullest.
The HECM FHA insured reverse mortgage can be used by senior home-owners age Sixty two and older to transform the home equity inside their house to a monthly flow of additional cashflow and/or a credit line to be paid back when they no longer live in the house.
The mortgage loan, typically referred to as HECM, is funded from a lender like a mortgage lender, bank, credit union or savings and loan association. To help the home owner in making a knowledgeable decision of if the program suits their needs, they are required to get consumer education and counseling using a HUD-approved HECM counselor.
Other California Cities: Pollock, Laguna West, Clarksburg, Parkway, Laguna West-Lakeside
HECM counselors will talk about program qualification conditions, financial consequences and alternatives to receiving a HECM and specifications for the house 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 needs.
California home owners who meet the eligibility requirements can complete a reverse mortgage application by getting in contact with a FHA-approved lending institution such as a bank, mortgage company, or savings and loan association.
Borrower Criteria When Getting A Reverse Mortgage In stateshort:
Age 62 years old or older
Own your own home as well as have substantial home equity
Occupy your house as a principal residence
Taking part in a consumer information session offered by an authorized HECM counselor
Mortgage Amount Based On:
Age for 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 applicant
No repayment so long as the house is the principal residence.
Costs may be financed in the mortgage
Property Requirements:
Single family house or 1-4 unit house with one unit occupied by the borrower
HUD-approved condo properties
Manufactured houses on property
Meet FHA property standards and flood requirements
How a Home Equity Conversion Mortgage in California} Program Works For California Homeowners
Homeowners 62 and older who have paid off their home loans or have only small home loan balances outstanding, and are also presently residing in the house meet the criteria to take part in HUD’s reverse mortgage loan.
The loan makes it possible for home-owners to borrow from the equity in their houses. 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 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 can vary dependent on Financial institution.
Unlike regular home equity loans, a HUD reverse mortgage doesn’t require repayment provided the house is the borrower’s primary residence. Mortgage companies regain their principal, plus interest, whenever the house is sold. The rest of the value of the house goes to the homeowner or to her or his survivors. You can never owe greater than your house’s appraisal value.
If the sales proceeds are not enough to repay the balance owed, HUD will pay the financial institution the sum of the shortfall. HUD’s Federal Housing Administration (FHA) collects an insurance premium from all of the homeowners to supply this coverage. That is the beauty of the HUD™ FHA guarantee.
The total a homeowner could borrow will depend on their age, the current interest rates, other loan costs and the appraisal vlaue of their house or FHA ‘s mortgage limits for their area, whichever is less. Generally, the more valuable your house is, the older you are, the lower the interest rate, the more you are able to borrow.
There are no asset or cash flow limits on homeowners obtaining HUD’s reverse house loan.
There’s also no limitations on the value of houses being qualified for a HUD reverse mortgage. The value of the house is determined by an appraisal. Nonetheless, the total that may be borrowed is derived 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 could be borrowed and then a .5 percent annual premium.