Reverse Mortgage California (HECM) – A Dream Come True!
A reverse mortgage is a financial instrument that allows seniors to access the equity in their home without income or credit qualifications. The important distinction between a reverse mortgage and a conventional mortgage is that there are no principal or interest payments required on the home while the borrower occupies the property. Repayment is only required if the borrower sells the home, or moves out of the property for more than 365 consecutive days.
Enjoy Your Retirement Years!
Government approved and insured, this loan let’s you make the most of the equity you’ve acquired in your home. Today, there are more loan options for retired individuals and couples than ever before. Whether you’re looking to pay off bills, purchase a new home, or convert your equity to additional income to enjoy your retirement, a Government Insured Home Equity Conversion Mortgage (HECM) may be the answer for you.
You may qualify for the HECM Loan Program if you are age 62 or older, own and live in your home, have substantial equity in the home and your property meets HECM guidelines. Most properties qualify, including single family residences, 2-4 unit properties (as long as you live in one of the units) and many condos & manufactured homes. HECM Loans allow you to borrow against the equity you’ve established in your home without repaying the loan for as long as you live in the home. Instead of making monthly payments, you can choose to receive monthly income…….for as long as you live in the home!
Why get a HECM Mortgage?
The tax free income received through the HECM Loan can be used for a variety of purposes.
Just like a traditional mortgage, you are not restricted on how the funds can be used.
Here are a few examples of what others have done with their HECM money:
•Supplement retirement income
•Cover medical expenses
•Make home repairs or improvements
•Pay off existing mortgage
•Pay in-home care
•Legacy donations, vacations and more
HECM vs. Traditional Mortgages
A HECM Loan is the opposite of a traditional mortgage. To qualify for a traditional mortgage, you must have sufficient income and an acceptable credit score. With a traditional mortgage, you borrow a large amount of money up front and make monthly payments for 30 years.
Qualifying for a HECM requires minimum income and credit history similar to VA loans.
For many older homeowners, a HECM Loan is an effective way to convert home equity into flexible, tax-free income. The benefits are numerous:
•Continue to live in and own the homewithout having to make a mortgagepayment
•Have peace of mind knowing that youand your heirs have no personal liabilityfor the repayment of the loan since it’ssecured by your home and insured bythe Federal Government.
•Repay the loan at any time without penalty
Questions and Answers
Q. Am I qualified for a HECM Loan if I currently have an existing loan on my home?
A. Yes, this is very common. We pay off the existing loan with money from your HECM Loan when you get your HECM loan.
Q. My property is held in a Living Trust. Do I qualify?
A. Yes, as long as you are the primary trustee and are qualified by age.
Q. To avoid probate, my children and I own the property in joint tenancy. Do we qualify?
A. Yes, if the children are age 62 and older and live in the property. Otherwise, you may wish to consult a trust attorney to look at other ways to avoid probate.
Q. Does the IRS consider the monthly advances from the HECM as income?
A. No. The cash advances are actually loan distributions and are not considered income. The cash advances are tax-free
Q. Are mobile homes eligible?
A. Yes. The home must have been built in 1977 or later; you must own the land under the home and have a permanent foundation that is approved by FHA.
Q. My spouse is permanently in a nursing home. Can we participate?
A. Yes. The requirement is only that one owner occupy the property as a principal residence.
Q. Are there restrictions on how I can use the money?
A. No. Of course not – it’s your money.
In a conventional mortgage, the homeowner makes a monthly amortized payment to the lender; after each payment the equity increases by the amount of the principal included in the payment, and when the mortgage has been paid in full, the property is released from the mortgage. In a reverse mortgage, the home owner is under no obligation to make payments, but is free to do so with no pre-payment penalties. The line of credit portion operates like a revolving credit line, so a payment in reduction of a line of credit increases the available credit by the same amount. Interest that accrues is added to the mortgage balance. As with any mortgage, title to the property remains in the name of the homeowners, to be disposed of as they wish. As with a conventional mortgage, the title is encumbered by the security interest the bank has in the reverse mortgage. If a borrower does not make full monthly payments to cover the interest, that interest is capitalized (added to the principal). In the event that the interest accrues to a point that the amount owed is less than the home’s value the borrower may stay in the home and FHA will cover any loss to the lender or borrower.
A reverse mortgage may be refinanced if enough equity is present in the home and interest rates have reduced, or more proceeds will be available to the borrower. A reverse mortgage lien is often recorded at a higher dollar amount than the amount of money actually disbursed at the loan closing. This recorded lien is at times misunderstood by some borrowers as being the payoff amount of the mortgage. The recorded lien works in similar fashion to a home equity line of credit where the lien represents the maximum lending limit, but the payoff is calculated based on actual disbursements plus interest owing.
To qualify for a reverse mortgage in the United States, the borrower must be at least 62 years of age and must occupy the property as their principal residence. In addition, any mortgage on the property must be low enough that it will be paid off with the reverse mortgage proceeds. There are no minimum income or credit requirements because no payments are required on the mortgage. The proceeds from the loan may be used at the discretion of the borrower and are not subject to income tax payment. While credit is not part of the qualification process a current or pending bankruptcy will require court approval prior to closing. Reverse mortgages follow FHA standards for property types, meaning most 1–4 family dwellings, FHA approved condominiums and PUD’s will qualify. Manufactured housing qualifies based on standard FHA guidelines. Before starting the loan process for an FHA/HUD reverse mortgage, applicants must take an approved counseling course. This counseling is available at no or low cost. The counseling is meant to serve as a safeguard for the borrowers, to ensure they completely understand the reverse mortgage. The counselor will explain the legal and financial obligations of a reverse mortgage. The borrower will receive a certificate of completion that is required before the loan application can be processed.
Cash from a Reverse Mortgage
The most common reverse mortgage is one in which the owner receives cash or a credit line from an existing home. The money from a reverse mortgage can be distributed in several different ways:
- in a lump sum, in cash, at settlement; this provides the cash immediately, but the interest fees are the highest
- as a cash payment (cash advance) every month, applied for a fixed term or for the owner’s life; monthly payments may be set up by HUD
- as a line of credit, similar to a home equity line of credit; this maximizes the money available, which can be withdrawn only as needed
- some combination of the above, as selected by the borrower.
Once the reverse mortgage is established, there are no restrictions on how the funds are used. The borrower can move money into investments or spend it as they wish. If a borrower wishes interest-bearing instruments, the money can be kept with the lender (in which case the account grows by the same percentage as the interest rate of the loan), the funds can be moved to a directed account with a financial specialist (an option that is risky unless the borrower directs the specialist’s investment options), or the money can be invested and managed by the borrower.
Call us today at 424 225 2167 for help. One of our mortgage professionals will help you get the best possible Reverse Mortgage loan solution for your situation. We’ll be with you every step of the process and not hand you off to someone else.
Knowledge is power, and the proverb is evident when it comes to reverse mortgage also. When you have the right information, you can choose the best among California reverse mortgage loan. Well, there is lot to know more about reverse mortgage loan California. Why worry when we are at a call away to educate about you on reverse mortgage loan California? We will help you understand the benefits of reverse mortgage loan California.
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Call us today at 424 225 2167 for help. One of our mortgage professionals will help you get the best possible California Reverse Mortgage loan solution for your situation. We’ll be with you every step of the process and not hand you off to someone else.
*Borrower is responsible for property taxes, homeowners insurance, and property maintenance. A HECM is a home-secured debt payable upon default or a maturity event.
**Some restrictions apply. This material has not been reviewed, approved, or issued by HUD, FHA, or any government agency.