The Home Equity Conversion Mortgage also known as (HECM) is the FHA’s Reverse Mortgage program; this allows you to withdraw a portion of the equity value on your property. This is a plan to ensure greater financial security for senior Americans. Baby Boomers are now heading into their 60’s or turning 65 and may need to supplement their Social Security, pay unforseen medical bills or home renovations.
A Reverse Mortgage is a seniors only home loan giving you the freedom to draw on the equity available in your home into hard cash. After all the years, you have spent paying off your mortgage can now assist in funding your retirement years.This loan, however, differs from ordinary mortgages in that you do not have to pay the loan back.Unless you are no longer using the home as your principal residence, or you may fail to meet certain restrictions in the mortgage agreement.
To qualify for an FHA HECM, you must be a homeowner of 62 years and onwards.You must own your home outright, or have a very small mortgage balance, which can be paid off with a portion of the proceeds from the reverse loan.You must prove to have the financial ability to pay monthly property charges such as insurance and tax.You must also be able to prove that you live in the home on a full-time basis.
An HECM can be applied for by any American senior, irrespective of what your last mortgage was or who it was insured by.
A 2-4 unit home, with one unit being occupied by the borrower, or a single family home qualify for an HECM. Manufactured homes and condominiums that are HUD and FHA approved, also qualify.
Monthly payments must be paid on second mortgages and equity lines of credit, this payment is for the principle loan and monthly interest. A reverse mortgage pays you; there are zero monthly payments on the principal debt and interest payments. You are however still required to pay utilities, real estate taxes, and flood and hazard insurance premiums.
As soon as the home is sold when the primary borrower either passes away or moves into a new home.The HECM charges,cash and interest must be repaid. Any extra over and above the amount owed are passed to your estate or surviving spouse.No debt is left for the estate or heirs to pay.
The amount of money you can receive for your home varies for the individual borrowers and is dependant on a variety of factors.The youngest age of the eligible surviving spouse or borrower.The current interest rate and the lesser amount of the property’s appraised value or the mortgage limit of $625 000.00 and the sales price of the property.If there is more than one borrower and no eligible non-borrowing spouse, the age of the youngest borrower is used to determine the amount you can borrow.
Do not use any service provider that charges a fee for referrals to an FHA-approved lender. FHA approved lenders can be located by searching online or contacting an HECM lender. Services fees are very low or free from HECM counselors.
The following payment plans are available for adjustable interest rate mortgages: Monthly payments for as long as at least one borrower lives and occupies the property as a principal residence.Monthly payments for a certain number of fixed period, months selected. Unscheduled payments, at times and in amounts of your choosing until the line of credit is exhausted.Combination payments a line of credit and monthly payments for as long as you live in the house.A combination of credit plus monthly payments for a fixed period of months selected by the borrower. The Single Disbursement Lump Sum payment plan is paid out as a Fixed Interest rate mortgage.Or the Single Lump sum disbursement at mortgage closing.
There is a new rule that you need to be aware of when it comes to the line of credit, you may only use less than 60% of this benefit in the first year to avoid higher up-front costs, and you may be better off long term paying up-front costs to obtain a lower rate if you would plan to use funds earlier.”
You are given three calendar days to cancel the loan. This is the three-day right of rescission. The cancellation process must be explained to you when the loan application closes. Be absolutely certain to ask the lender for cancellation instructions. Many Mortgage lenders have different processes of canceling a loan. Ensure you have the details of the appropriatepeople to contact, phone numbers, fax numbers, addresses, or written instructions on the process that particular company has in place.
If you are financially stable and your house is paid, it is a good idea to set up this type of no cost mortgage.