REVERSE MORTGAGE PROGRAM
This Program is named the Home Equity Conversion Mortgage (HECM). It is offered by the U.S. Department of Housing and Urban Development (HUD) and is insured by the Federal Housing Administration (FHA).
Known as the Reverse Mortgage, it's a loan that enables homeowners 62 or older to convert part of their home equity into Tax Free Cash without having to sell or leave their home. They retain title to ownership. If they have an existing mortgage or lien, it is paid off and the reverse mortgage loan replaces it. There are NO Monthly Payments!
Home Equity is the difference between the FHA Appraisal Value of the Home and what is owed on any existing mortgages or liens.
Before applying for a HECM, you must talk with a counselor from an independent government-approved counseling agency. The counselor is required to explain the loan costs and financial implications. The counselor will be able to help you compare the costs of different types of reverse mortgages and tell you how different payment options, fees and other costs affect the total cost of the loan over time. To find a counselor, visit www.hud.gov/offices/hsg/sfh/hecm/hecmlist.cfm or call 1-800-569-4287. Most counseling agencies charge around $125 for their services. The fee can be paid from the loan proceeds, but you cannot be turned away if you can't afford the fee.
You can be counseled in person or over the telephone from a local HUD-approved counseling agency, or by telephone from a national counseling agency, such as National Foundation for Credit Counseling (866-698-6322), Money Management International (877-908-2227). CredAbility (866-616-3716) and National Council on Aging (800-510-0301). We will provide you with a list of counseling options once you are ready to proceed. We have a List of Free Counselors.
You will be provided with advance disclosures so you are fully aware of the costs involved in obtaining a reverse mortgage. You will also need your home appraised.
Since the value of your home is a factor that determines how much money you can receive from a reverse mortgage, an FHA approved appraisal is required. The lender will order the appraisal, which is paid for by the borrower at the time of application.
Lump Sum – in Cash
Tenure – receive equal monthly payments as long as one borrower lives and continues to occupy the property as a principal residence.
Term – receive equal monthly payments for a fixed period of months for a specific term.
Line of Credit – receive unscheduled payments or in installments, at times and in an amount of your choosing until the line of credit is used up. You only pay interest on money you receive and use.
Modified Tenure – receive a combination of line of credit and scheduled monthly payments for as long as you remain in the home.
Modified Term – receive a combination of line of credit plus monthly payments for a fixed period of months selected by the borrower.
You can change your plan option any time for about $20.
Remember, the money is all Tax Free and can be used for any purpose.
Several factors determine how much you can borrow, they include: the home's geographic area and valuation, the age of the youngest borrower, the current interest rate and the type of Reverse Mortgage you select at the time of origination.
Government websites project a 4% per year valuation increase on US Homes. You can Sell or Refinance into a Conventional Home Loan anytime and if home values increase significantly, your home equity could also increase, enabling you to obtain another equity loan.
Older borrower receive more money because lenders include life expectancy in their considerations. Reverse Mortgage Loans have no income, credit score or medical requirements. A credit report is obtained, but only to check for Federal Liens or Liens affecting the property. The money is yours, so its Tax Free and you can use it for any purpose.
You must own the home as your primary residence. Home qualifying types are single family, qualified condominiums, townhomes, manufactured homes and 1-4 family owner occupied properties with one unit occupied by the borrower.
The HECM Standard offers the most money. The HECM Saver offers the lowest costs, due to the low up front MIP fee, however, the annual fees for the HECM Standard and the HECM Saver are the same.
The HECM Standard requires a 2% mortgage insurance premium (MIP) of the maximum amount (lesser of the home value or national lending limit); plus an annual premium of 1.25% of the loan balance.
The HECM Saver also has an annual insurance premium of 1.25%, however, the upfront MIP is .01%. The HECM Saver doesn't provide as much money as the HECM Standard. (about 10-18% less)
There are No Monthly Payments. When the home is sold or no longer used as a primary residence, the cash, interest, and other HECM finance charges must be repaid. You can repay the loan anytime without penalty. All proceeds beyond the amount owed belong to your spouse or estate. This means any remaining equity can be transferred to your heirs. No debt is passed along to the estate or heirs. The MIP is used to offset the overall losses s of this Government FHA Program.
If your home sells for an amount less than what is owed to the lender, the FHA makes up the rest – not the home owner. You (or your heirs) won't go into debt as a result of an FHA reverse mortgage home loan.
You cannot be forced to sell as long as you maintain the home and pay your property taxes and insurance. If you live outside your home for twelve consecutive months, the loan must be repaid.
As the Homeowner, you can sell the home anytime and payoff the HECM Loan and receive the remaining equity in Cash.
If your heirs decide to sell the home, they have twelve months to complete the sale. When the house is sold, the remaining equity goes to the heirs. Your heirs can elect to keep the home, by refinancing and paying off the HECM Loan.
Purchase Reverse Mortgage
Some Seniors want to sell their home and buy another. Perhaps they want to downsize because of unneeded space or they don't want exterior maintenance or for other reasons, such as they want a one story because stairs are a problem; many just want to move to a retirement community or closer to their family. If you want a change, we've got the answer - a Purchase Reverse Mortgage. We can even coordinate the selling escrow with the new home purchase so you'll have only one closing. You can also purchase another home without selling your home and qualify for the Purchase Reverse HECM Program. Click Here for More Information.
Loan closing costs for a reverse mortgage are the same as what you would pay for a traditional mortgage.
Most of the upfront costs are government regulated and there are limits on the total fees and interest that can be charged for a reverse mortgage.
Home Loan Brokerage does not receive the Origination Fee; it is paid to the Lender. The Origination Fee for a HECM loan is capped at 2% of the value of the property up to the first $200,000 and 1% of the value greater than $200,000. There is an overall cap on HECM origination fees of $6,000. You can finance these costs as part of the mortgage.
This means you incur very little out-of-pocket expense to get a reverse mortgage. Your only out-of-pocket expense is the appraisal fee and maybe a charge for counseling depending on the counseling organization you work with. Low-income homeowners are exempted from being charged for counseling.
Your final loan balance is comprised of the amount borrowed, plus annual mortgage insurance premiums and interest.
As the Borrower, you do not pay a Broker Commission. Home Loan Brokerage is paid a Mortgage Broker Commission by the Lender.
With a reverse mortgage, you are charged interest only on the proceeds that your receive. Interest rates are generally calculated from one of two indexes, either the U.S. Treasury Constant Maturity Rate or the London Interbank Offered Rate (LIBOR) depending on the consumer's preference and priced at a set margin above the index. Interest is not paid out of your available loan proceeds, but instead it compounds over the life of the loan until repayment occurs.
You can choose an adjustable interest rate or a fixed rate. If you choose an adjustable interest rate, you may choose to have the interest rate adjust monthly or annually. Lenders may not adjust annually adjusted HECMs by more than 2 percentage points per year and not by more than 5 total percentage points over the life of the loan. FHA does not require interest rate caps on monthly adjusted HECMs.
We offer several different interest rate plans. The higher the interest rate, the more cash you can receive.
If you have any questions or you wish to proceed in obtaining a reverse mortgage, talk to us, we're friendly people who can help you Live the Life you Deserve! Click Here.