The Home Equity Conversion Mortgage (HECM) is FHA's Reverse Mortgage which allows withdrawal of some of home's equity. The HECM is a safe plan that can give older Americans greater financial security. Many use it supplement social security and meet unexpected medical expenses, make home improvements and more. Contact me for a copy of free booklet from the National Council on Aging. "Use Your Home to Stay at Home". It is smart to know more about reverse mortgages and decide it one may be right for you!
What is a reverse mortgage
A reverse mortgage is a special type of home loan that lets you convert a portion of the equity in your home into cash. The equity that built up over the years of home mortgage payments can be paid to you. Unlike a traditional home equity loan or second mortgage, no repayment is required until the borrower(s) no longer use the home as their primary residence. You can also use a HECM to purchase a primary residence if you are able to use cash on hand to pay the difference between the HECM proceeds and sales price plus closing costs for the property you are purchasing.
Can I qualify for FHA's HECM reverse mortgage?
To be eligible for a reverse mortgage, FHA requires you to be a homeowner 62 years of age or older, own your home outright, or have a low mortgage balance that can be paid off at closing with proceeds from the reverse loan and you must live in the home. You are also required to receive consumer information free or at very low cost from a HECM couselor prior to obtaining the loan. I can give you a list of HECM counselors.
Yes, it doesn't matter if you had an FHA mortgage
Can I apply if I didn't buy my present house with FHA mortgage?
Your new FHA HECM will be FHA-insured.
What types of homes are eligible?
To be eligible, your home must be a single family home or 1-4 unit home with one unit occupied by the borrower. HUD-approved condo's are also eligible.
What's the difference between a reverse mortgage and bank home equity loan?
With a traditional second mortgage, or a home equity line of credit, you must have sufficiewnt income versus debt ratio to qualify for the loan, and you are required to make monthly mortgage payments. The reverse mortgage is different in that it pays you, and is available regardless of your current income. The amount you can borrow depends on your age, the current interest rate, and the appraised value of your home or FHA's mortgage limits for your area, whichever is less. Generally, the more valuable your home, the older you are and the lower the interest, the more you can borrow. You don't make payments because the loan is not due as long as the house is your primary residence. Like all homeowners, you are still required to pay your real estate taxes, insurance and utilities. With an FHA HECM you cannot be foreclosed or forced to vacate your house because you "missed your mortgage payment".
Can the lender take my home away if I outlive the loan?
No, you do not need to repay the loan as long as you or one of the borrowers continues to live in the house and keep the taxes and insurance current and maintain the property.
Will I still have an estate that I can leave to my heirs?
When you sell your home, you or your estate will repay the cash you received from the reverse mortgage plus interest and other fees, to the lender The remaining equity in your home, if any, belongs to you or to your heirs.
How much money can I get from my home?
The amount you can borrow depends on your age, the current interest rate, and the appraised value of your home or FHA's mortgage limits for your area, whichever is less. Generally, the more valuable your home is, the older you are and the lower the interest, the more you can borrow. Give me a call and I will be happy to use your scenario for a quote.
Should I use an estate planning service to find a reverse mortgage?
FHA does NOT recommend using any service that charges a fee for referring a borrower to an FHA lender. FHA provides this information free, and HECM housing counselors are available for free or at very low cost.
How do I receive my payments?
You have five options:
Equal monthly payments as long as at least one borrower lives and continues to occupy the property as primary residence.
Equal monthly payments for a fixed period of months selected
LINE OF CREDIT
Unscheduled payments or installments, at times and in amounts of your choosing until the line of credit is exhausted.
Combination of line of credit with monthly payments for as long as you remain in the home.
Combination of line of credit plus monthly payments for a fixed period of months selected by the borrower.
You may also contact the US Department of Housing and Urban Development
202-708-1112 to find the address of a HUD office near you.
Call Valerie Direct at 205.995.7283 ex.305