Reverse mortgages (also known as Home Equity Conversion Mortgages, abbreviated to HECM) are aiding older homeowners in California gain better financial stability and enjoy their retirement living years to the fullest.
The HECM FHA insured reverse mortgage can be utilized by senior home-owners age Sixty two and older to convert the home equity inside their home into a monthly flow of additional cashflow and/or a credit line to be repaid once they no longer live in the home.
The mortgage, typically referred to as HECM, is funded by a lending institution such as a mortgage lender, traditional bank, credit union or savings and loan association. To help the home-owner in making an informed decision of whether the program suits their requirements, they’re required to get consumer education and counseling by a HUD-approved HECM counselor.
Other California Cities: La Riviera, Manlove, Rosemont, Mayhew, Arden-Arcade
HECM counselors will discuss program qualification requirements, financial consequences and alternatives to obtaining a HECM and provisions for the mortgage loan becoming due and payable. After the completion of HECM counseling, the home-owner should be able to make an independent, well informed decision of whether or not this product will meet their requirements.
California home-owners who satisfy the eligibility requirements can complete a reverse mortgage application by getting in touch with a FHA-approved lending institution such as a bank, loan company, or savings and loan association.
Borrower Standards When Getting A Reverse Mortgage In stateshort:
Age 62 years old or older
Own your own home and also have significant home equity
Occupy your house as a principal residence
Taking part in a consumer information session given by an approved HECM counselor
Mortgage Amount Based On:
Age of the youngest homeowner
Current interest rates
Lesser of appraised value or the FHA insurance limit
Financial Requirements:
Income and credit rating requirements will be required of the borrower
No repayment providing the home is the principal residence.
Loan 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 borrower
HUD-approved condominiums
Manufactured homes on land
Meet FHA property conditions and flood requirements
How a reverse home loan} Program Works For California Homeowners
Property owners 62 and older that have paid off their home loans or have only small loan balances remaining, and are also presently living in the home meet the criteria to take part in HUD’s reverse mortgage loan.
The loan permits home-owners to borrow from the equity in their properties. Homeowners can select 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 can vary dependant upon Loan company.
Contrary to ordinary home equity loans, a HUD reverse mortgage does not require repayment provided the home is the borrower’s principal residence. Mortgage lenders recover their principal, plus interest, whenever the home is sold. The rest of the value of the home goes to the homeowner or to her or his survivors. You can never owe above your home’s appraisal value.
If the sales proceeds are not enough to pay the total amount payable, HUD pays off the lender the sum of the deficiency. HUD’s Federal Housing Administration (FHA) collects an insurance premium from all homeowners to provide this coverage. This is the beauty of the HUD™ FHA guarantee.
The total a homeowner can borrow depends upon how old they are, the current interest rate, other loan charges and the appraisal vlaue of their home or FHA ‘s mortgage limits for their area, whichever is less. Usually, the more valuable your home is, the older that you are, the lower the interest rate, the more you’ll be able to borrow.
There are not any asset or income restrictions on homeowners acquiring HUD’s reverse home loan.
Additionally, there are no limits on the value of properties being qualified for a HUD reverse mortgage. The value of the home will be determined by an appraisal. Nevertheless, the amount that could 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 percent of the maximum claim amount that may be borrowed along with a .5 percent annual premium.