Reverse mortgages (often called Home Equity Conversion Mortgages, shortened to HECM) are assisting elderly people in California achieve better financial stability and enjoy their retirement years to the fullest.
The HECM FHA insured reverse mortgage may be used by senior homeowners age 62 and older to transform the home equity in their house into a monthly flow of additional cash flow and/or a line of credit to be repaid after they no longer occupy the house.
The mortgage loan, also known as HECM, is funded from a mortgage company such as a mortgage lender, traditional bank, credit union or savings and loan association. To support the home owner in making a well informed decision of whether this program satisfies their requirements, they are required to get consumer education and counseling using a HUD-approved HECM counselor.
Other California Cities: Westwind Estates, Mikon, Bryte, Casa Mobile Home Park, Peethill
HECM counselors will talk about program eligibility requirements, financial implications and alternatives to getting a HECM and provisions for the house loan becoming due and payable. Upon the conclusion of HECM counseling, the home owner should be able to make an independent, informed decision of whether or not the product will satisfy their requirements.
California home-owners who meet 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 For Getting A Reverse Mortgage In stateshort:
Age 62 years of age or older
Own your home as well as have substantial home equity
Live in your house as a primary residence
Taking part in a consumer information session provided by an authorized HECM counselor
Mortgage Amount Based On:
Age of the youngest applicant
Current interest rates
Lesser of appraised value or the FHA insurance limit
Financial Requirements:
Income and credit requirements will be required of the borrower
No repayment so long as the property is the primary residence.
Closing costs may be financed in the mortgage
Real Estate Requirements:
Single family home or 1-4 unit home with one unit occupied by the homeowner
HUD-approved condominiums
Manufactured houses on land
Meet FHA property conditions and flood requirements
How a reverse mortgage loan in California} Program Works For California Homeowners
Property owners 62 and older which have repaid their mortgages or have only small loan amounts remaining, and are currently living in the house meet the requirements to participate in HUD’s reverse mortgage loan.
The loan allows home-owners to borrow against the equity in their homes. 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 conditions 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 house is the borrower’s primary residence. Financial institutions regain their principal, plus interest, when the house is sold. The remainder of the value of the house goes to the homeowner or to their survivors. You can’t ever owe above your house’s appraised value.
If the sales funds are inadequate to pay the total due, HUD will pay the lender the sum of the deficiency. HUD’s Federal Housing Administration (FHA) collects an insurance premium from all borrowers to provide this coverage. This is the great thing about the HUD™ FHA guarantee.
The amount of money a homeowner may borrow depends upon how old they are, current interest rate, other loan costs and the appraisal vlaue of their house or FHA ‘s mortgage limits with their area, whichever is less. Generally, the more valuable your property is, the older that you are, the lower the interest, the more you could borrow.
There are no asset or income restrictions on borrowers obtaining HUD’s reverse loan.
There are also no limitations on the value of homes qualifying for a HUD reverse mortgage. The value of the property is determined by an appraisal. Nonetheless, the total amount 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 get 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% annual premium.