Reverse mortgages (also referred to as Home Equity Conversion Mortgages, shortened to HECM) are aiding elderly homeowners in California gain an increased monetary security and enjoy their retirement living years to the fullest.
The HECM FHA insured reverse mortgage can be used by senior home owners age 62 and older to convert the home equity in their property to a monthly flow of additional cashflow and/or a line of credit to be repaid after they cease to live in the property.
The mortgage loan, also known as HECM, is funded by a loan company such as a mortgage lender, traditional bank, credit union or savings and loan association. To help the home owner in making a well informed decision of if this program fulfills their requirements, they are required to get consumer education and counseling using a HUD-approved HECM counselor.
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HECM counselors will discuss program eligibility requirements, financial implications and alternatives to receiving a HECM and specifications for the mortgage becoming due and payable. After the completion of HECM counseling, the home owner must be able to make an independent, informed decision of whether or not this product will satisfy their requirements.
California home-owners who meet the eligibility criteria 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 Criteria When Getting A Reverse Mortgage In stateshort:
Age 62 years of age or older
Own your property and have significant home equity
Live in your property as a principal residence
Taking part in a consumer information session provided by an authorized HECM counselor
Mortgage Amount Based On:
Age of the youngest borrower
Current mortgage rate
Lesser of appraisal value or the FHA insurance limit
Financial Requirements:
Income and credit rating qualifications are required of the applicant
No repayment as long as the house is the principal residence.
Mortgage Fees may be financed in the mortgage
Property Requirements:
Single family home or 1-4 unit home with one unit occupied by the homeowner
HUD-approved condo properties
Manufactured homes on property
Meet FHA property specifications and flood requirements
How a reverse mortgage} Program Works For California Homeowners
Homeowners 62 and older that have paid back their mortgages or have only small home loan balances remaining, and are also currently residing in the property meet the requirements to take part in HUD’s reverse mortgage loan.
The loan permits homeowners to borrow on the equity in their properties. Homeowners can choose from five payment plans:
Tenure – equal monthly payments as long as at least one borrower lives and continues to occupy the property as a principal residence.
Term – equal monthly paymentsfor 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 payments for as long as the borrower remains in the home.
Modified Term – combination of line of credit with monthly payments 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 could differ depending on Lender.
Contrary to regular home equity loans, a HUD reverse mortgage does not need repayment as long as the property is the borrower’s principal residence. Mortgage lenders recover their principal, plus interest, when the property is sold. The rest of the value of the property would go to the homeowner or to his / her survivors. You can never owe more than your property’s appraised value.
If the sales funds are insufficient to pay the balance due, HUD pays the financial institution the amount of the shortfall. 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 total amount a homeowner may borrow depends upon what their age is, current interest rate, other loan costs and the appraisal of their property or FHA ‘s mortgage limits with 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’re able to borrow.
There are no asset or income limits on homeowners obtaining HUD’s reverse loan.
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. However, the total amount that may be borrowed comes 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 obtain HECM mortgages. Homeowners are charged an upfront insurance premium that is 2 percent of the maximum claim amount which can be borrowed as well as a .5% annual premium.