Reverse mortgages (also referred to as Home Equity Conversion Mortgages, shortened to HECM) are aiding elderly homeowners in California reach better financial security and enjoy their retirement living years to the fullest.
The HECM FHA insured reverse mortgage may be used by senior property owners age 62 and older to convert the equity inside their house into a monthly flow of extra cash flow and/or a line of credit to be repaid once they cease to inhabit the house.
The mortgage loan, often called HECM, is funded by a loan company like a mortgage lender, bank, credit union or savings and loan association. To support the home owner in making a knowledgeable decision of whether the program meets their requirements, they’re required to receive consumer education and counseling from a HUD-approved HECM counselor.
Other California Cities: Bombay, Elverta, Robla, Del Paso, McClellan Park
HECM counselors will talk about program eligibility conditions, financial implications and alternatives to obtaining a HECM and specifications for the mortgage becoming due and payable. Upon the conclusion of HECM counseling, the home owner should be able to make an independent, educated decision of whether the product will satisfy their requirements.
California homeowners 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 Requirements To Get A Reverse Mortgage In stateshort:
Age 62 years old or older
Own your own home and have sizeable equity
Live in your house as a principal residence
Taking part in a consumer information session offered by an authorized HECM counselor
Mortgage Amount Based On:
Age for the youngest homeowner
Current interest rate
Lesser of appraisal value or the FHA insurance limit
Financial Requirements:
Income and credit qualifications will be required of the borrower
No repayment provided that the house is the principal residence.
Fee may be financed in the mortgage
Real Estate Requirements:
Single family house or 1-4 unit house with one unit occupied by the borrower
HUD-approved condominiums
Manufactured houses on land
Meet FHA property guidelines and flood requirements
How a Home Equity Conversion Mortgage in California} Program Works For California Homeowners
Home-owners 62 and older who have paid back their mortgages or have only small mortgage balances remaining, and are also currently residing in the house are eligible to participate in HUD’s reverse mortgage program.
The loan makes it possible for property owners to borrow on the equity in their homes. 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 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 circumstances change can restructure their payment selections for a nominal fee of $20. Fees could differ dependant upon Lender.
As opposed to ordinary home equity loans, a HUD reverse mortgage does not need repayment providing the house is the borrower’s primary residence. Loan providers regain their principal, plus interest, whenever the house is sold. The rest of the value of the house goes to the homeowner or to his or her heirs. You can never owe greater than your house’s appraisal value.
If the sales proceeds are inadequate to pay the amount payable, HUD will pay the lender the amount of the shortfall. HUD’s Federal Housing Administration (FHA) collects an insurance premium from all of the borrowers to supply this coverage. That is the wonderful thing about the HUD™ FHA guarantee.
The total amount a homeowner may borrow is dependent upon how old they are, current interest rates, other loan costs and the appraisal vlaue of their house or FHA ‘s mortgage limits for their area, whichever is less. Generally, the more valuable your property is, the older you are, the lower the rate, the more you are able to borrow.
There aren’t any asset or cash flow limits on borrowers acquiring HUD’s reverse home loan.
Additionally, there are no limits on the value of homes being qualified for a HUD reverse mortgage. The value of the property is determined by an appraisal. Nonetheless, 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 percent of the maximum claim amount which may be borrowed as well as a .5 percent annual premium.