Reverse mortgages (generally known as Home Equity Conversion Mortgages, abbreviated to HECM) are assisting elderly home owners in California attain better personal financial stability 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 in their home to a monthly flow of extra cashflow and/or a line of credit to be paid back when they no longer occupy the home.
The home loan, typically referred to as HECM, is funded by a lending institution such as a mortgage lender, bank, credit union or savings and loan association. To assist the home owner in making a knowledgeable decision of if this program suits their needs, they’re required to receive consumer education and counseling by a HUD-approved HECM counselor.
Other California Cities: Wilton, Coffing, Dillard, Vineyard, Fallbrook
HECM counselors will talk about program eligibility requirements, financial implications and alternatives to obtaining a HECM and provisions for the mortgage becoming due and payable. After the conclusion of HECM counseling, the home owner will be able to make an independent, informed decision of whether or not the product will satisfy their needs.
California home owners who fulfill the eligibility requirements can complete a reverse mortgage application by getting in contact with a FHA-approved lender such as a bank, mortgage company, or savings and loan association.
Borrower Standards For Getting A Reverse Mortgage In stateshort:
Age 62 years old or older
Own your own home as well as have sizeable equity
Occupy your property as a principal residence
Participation in a consumer information session given by an approved HECM counselor
Mortgage Amount Based On:
Age for the youngest homeowner
Current mortgage 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 so long as the property 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 land
Meet FHA property guidelines and flood requirements
How the reverse mortgage loan} Program Works For California Homeowners
Homeowners 62 and older that have paid back their home loans or have only small home loan balances outstanding, and are presently living in the home meet the requirements to take part in HUD’s reverse mortgage program.
The loan allows homeowners to borrow from the equity in their properties. 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 situations change can restructure their payment options for a nominal fee of $20. Fees may vary dependant upon Financial institution.
Unlike normal home equity loans, a HUD reverse mortgage does not need repayment provided the home is the borrower’s principal residence. Loan providers regain their principal, plus interest, whenever the home is sold. The remainder of the value of the home goes to the homeowner or to his or her heirs. You can never owe greater than your home’s appraised value.
If the sales funds are insufficient to pay the total payable, HUD pays the lender the sum of the deficiency. HUD’s Federal Housing Administration (FHA) collects an insurance premium from all of the homeowners to supply this coverage. This is the wonderful thing about the HUD™ FHA guarantee.
The amount a homeowner can borrow depends upon how old they are, current interest rate, other loan costs and the appraised value of their home or FHA ‘s mortgage limits with their area, whichever is less. Generally, the more valuable your house is, the older that you are, the lower the interest, the more you can borrow.
There are not any asset or income restrictions on homeowners receiving HUD’s reverse loan.
There’s also no limitations on the value of properties being qualified for a HUD reverse mortgage. The value of the house is determined by an appraisal. However, 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 homeowners who receive HECM mortgages. Homeowners are charged an upfront insurance premium which is 2% of the maximum claim amount that may be borrowed along with a .5% annual premium.