Reverse mortgages (also referred to as Home Equity Conversion Mortgages, shortened to HECM) are aiding older home owners in California reach greater monetary security and enjoy their retirement living 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 equity inside their house into a monthly stream of extra cash flow and/or a line of credit to be paid back after they do not occupy the house.
The home 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 homeowner in making an informed determination of if the program satisfies their requirements, they are required to get consumer education and counseling using a HUD-approved HECM counselor.
Other California Cities: Sorroca, Lund, Green, Morgans Landing, Paintersville
HECM counselors will discuss program eligibility requirements, financial implications and alternatives to getting a HECM and provisions for the house loan becoming due and payable. After the completion of HECM counseling, the homeowner must be able to make an independent, well informed determination of whether or not the product will satisfy their requirements.
California homeowners who fulfill the eligibility requirements can complete a reverse mortgage application by contacting a FHA-approved lender such as a bank, mortgage company, or savings and loan association.
Borrower Requirements For Getting A Reverse Mortgage In stateshort:
Age 62 years of age or older
Own your property and have substantial equity
Live in your house as a primary residence
Taking part in a consumer information session offered by an approved HECM counselor
Mortgage Amount Based On:
Age of the youngest consumer
Current interest rate
Lesser of appraised value or the FHA insurance limit
Financial Requirements:
Income and credit rating requirements will be required of the homeowner
No repayment provided the home is the primary residence.
Closing costs may be financed in the mortgage
Property Requirements:
Single family home or 1-4 unit home with one unit lived in by the borrower
HUD-approved condo properties
Manufactured houses on property
Meet FHA property requirements and flood requirements
How a reverse home loan in California} Program Works For California Homeowners
Property owners 62 and older who have paid back their mortgage loans or have only small home loan balances remaining, and are also currently residing in the house are eligible to take part in HUD’s reverse mortgage loan.
The loan permits property owners to borrow against 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 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 conditions change can restructure their payment options for a nominal fee of $20. Fees could differ dependent on Lender.
Unlike normal home equity loans, a HUD reverse mortgage does not require repayment providing the house is the borrower’s primary residence. Financial institutions recover their principal, plus interest, whenever the house is sold. The remainder of the value of the house goes to the homeowner or to her or his heirs. You can’t ever owe in excess of your house’s appraised value.
If the sales funds are insufficient to repay the amount owed, HUD pays the lending company the amount of the shortfall. HUD’s Federal Housing Administration (FHA) collects an insurance premium from all of the homeowners to supply this coverage. This is the beauty of the HUD™ FHA guarantee.
The amount of money a homeowner may borrow is determined by how old they are, current interest rates, other loan charges and the appraisal vlaue of their house or FHA ‘s mortgage limits for their area, whichever is less. Usually, the more valuable your house is, the older you are, the lower the interest, the more you are able to borrow.
There are not any asset or cash flow limits on homeowners obtaining HUD’s reverse home loan.
In addition there are no limitations on the value of houses qualifying for a HUD reverse mortgage. The value of the house will be determined by an appraisal. However, the total amount which can 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 property owners who receive HECM mortgages. Homeowners are charged an upfront insurance premium which is 2% of the maximum claim amount that may be borrowed and then a .5% annual premium.