Reverse mortgages (also known as Home Equity Conversion Mortgages, shortened to HECM) are helping elderly residents in California achieve better monetary security and enjoy their retirement living years to the fullest.
The HECM FHA insured reverse mortgage can be used by senior property owners age Sixty two and older to convert the equity inside their home to a monthly flow of extra cashflow and/or a credit line to be paid back once they no longer occupy the home.
The mortgage loan, also known as HECM, is funded by a mortgage company like a mortgage lender, bank, credit union or savings and loan association. To help the homeowner in making an informed decision of whether this program suits their requirements, they are required to get consumer education and counseling by a HUD-approved HECM counselor.
Other California Cities: Citrus Heights, Antelope, Sabre City, Orangevale, Foothill Farms
HECM counselors will talk about program eligibility requirements, financial implications and alternatives to obtaining a HECM and provisions for the home loan becoming due and payable. After the conclusion of HECM counseling, the homeowner will be able to make an independent, well informed decision of whether the product will meet their requirements.
California home-owners who fulfill the eligibility requirements can complete a reverse mortgage application by getting in contact with a FHA-approved lending institution such as a bank, loan 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 have substantial equity
Occupy your house as a principal residence
Participation in a consumer information session given by an authorized HECM counselor
Mortgage Amount Based On:
Age of the youngest homeowner
Current interest rates
Lesser of appraisal value or the FHA insurance limit
Financial Requirements:
Income and credit requirements will be required of the borrower
No repayment provided that the house is the principal residence.
Mortgage Fees may be financed in the mortgage
Property Requirements:
Single family house or 1-4 unit house with one unit occupied by the homeowner
HUD-approved condos
Manufactured houses on property
Meet FHA property specifications and flood requirements
How the reverse mortgage loan} Program Works For California Homeowners
Home owners 62 and older that have repaid their mortgage loans or have only small loan balances outstanding, and are also currently residing in the home meet the criteria to participate in HUD’s reverse mortgage program.
The loan permits home-owners to borrow on the equity in their houses. 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 credit line with monthly installments for as long as the borrower remains in the home.
Modified Term – combination of credit line with monthly installments 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 may vary dependent on Financial institution.
In contrast to normal 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 would go to the homeowner or to his / her heirs. You’re never going to owe above your home’s appraisal value.
If the sales funds are not enough to cover the amount due, HUD pays off the lender the sum of the shortfall. 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 total amount a homeowner can borrow is dependent upon their age, current interest rate, other loan fees and the appraisal of their home or FHA ‘s mortgage limits with their area, whichever is less. Usually, the more valuable your house is, the older that you are, the lower the interest rate, the more you are able to borrow.
There are not any asset or income restrictions on homeowners receiving HUD’s reverse house loan.
There are no restrictions on the value of houses getting qualified for a HUD reverse mortgage. The value of the house is determined by an appraisal. However, the total amount which can 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 that is 2% of the maximum claim amount which may be borrowed and then a .5 percent annual premium.