Reverse mortgages (also called Home Equity Conversion Mortgages, abbreviated to HECM) are serving to elderly people in California obtain an increased monetary stability and enjoy their retirement living years to the fullest.
The HECM FHA insured reverse mortgage could be used by senior home-owners age 62 and older to convert the equity inside their home to a monthly stream of extra cashflow and/or a line of credit to be paid back after they cease to occupy the home.
The mortgage, also known as HECM, is funded from a lending institution such as a mortgage lender, traditional bank, credit union or savings and loan association. To assist the homeowner in making a knowledgeable decision of if this program fulfills their requirements, they are required to get consumer education and counseling by a HUD-approved HECM counselor.
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HECM counselors will talk about program eligibility requirements, financial consequences and alternatives to receiving a HECM and provisions for the mortgage becoming due and payable. After the completion of HECM counseling, the homeowner should be able to make an independent, well informed decision of whether the product will meet their requirements.
California home-owners who meet the eligibility requirements can complete a reverse mortgage application by contacting a FHA-approved lender like a bank, loan company, or savings and loan association.
Borrower Standards To Get A Reverse Mortgage In stateshort:
Age 62 years of age or older
Own your home and have substantial equity
Live in your house as a principal residence
Participation in a consumer information session provided by an authorized HECM counselor
Mortgage Amount Based On:
Age for the youngest applicant
Current interest rates
Lesser of appraised value or the FHA insurance limit
Financial Requirements:
Income and credit history qualifications are required of the borrower
No repayment provided the house is the principal residence.
Mortgage Fees may be financed in the mortgage
Real Estate Requirements:
Single family home or 1-4 unit home with one unit occupied by the borrower
HUD-approved condominiums
Manufactured homes on land
Meet FHA property specifications and flood requirements
How a HECM} Program Works For California Homeowners
Home owners 62 and older who have paid back their mortgages or have only small loan balances remaining, and are presently living in the home are eligible to take part in HUD’s reverse mortgage program.
The loan permits home owners to borrow from the equity in their houses. Homeowners can select 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 circumstances change can restructure their payment options for a nominal fee of $20. Fees can vary depending on Lender.
In contrast to ordinary home equity loans, a HUD reverse mortgage doesn’t require repayment providing the home is the borrower’s principal residence. Mortgage lenders recover their principal, plus interest, when the home is sold. The remaining value of the home would go to the homeowner or to his or her survivors. You can never owe more than your home’s appraisal value.
If the sales proceeds are not enough to repay the total amount payable, HUD pays off the mortgage 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 of money a homeowner could borrow will depend on what their age is, the current interest rates, other loan fees and the appraised value of their home or FHA ‘s mortgage limits for their area, whichever is less. Typically, the more valuable your property is, the older that you are, the lower the rate, the more you’ll be able to borrow.
There are no asset or income limitations on homeowners obtaining HUD’s reverse mortgage.
In addition there are no limits on the value of houses getting qualified for a HUD reverse mortgage. The value of the property is determined by an appraisal. Nevertheless, the total amount which can be borrowed is derived from the lesser of the appraisal amount or FHA mortgage limit, which is $675,750.
HUD collects funds from insurance premiums charged to the home owners who obtain HECM mortgages. Homeowners are charged an upfront insurance premium that is 2 percent of the maximum claim amount that may be borrowed and then a .5% annual premium.