Reverse Mortgage Loan Description

A Reverse Mortgage Loan, is just that, "A Loan" A Reverse Mortgage is a Home Equity Conversion Mortgage, also known as a (HECM) federally insured "non-recourse" loan, which means you'll never owe more than what your home sells for (even if your outstanding loan balance is larger). Regulated by Federal Housing Administration (FHA) and the U.S. Department of Housing and Urban Development (HUD). These loans are specifically geared for homeowners 62 years of age and older, it allows you to convert part of the equity in your home into cash. Unlike traditional home equity loans that are required to be paid back, the borrower does not have to make principle & interest mortgage payments!

Thats right! The borrower does not have to make a monthly mortgage payment with a reverse mortgage loan. If you choose to make a payment, there will never be a penalty assessed.

Borrower(s) must continue to pay for Property Taxes, Homeowners Insurance and Home repairs must continue to be maintained.

Like its name indicates, this program pays the homeowner either a one-time large payout at closing, monthly installment or via a line of credit. Reverse mortgage loans are great options for seniors looking to supplement their monthly income in retirement.

ADJUSTABLE-RATE HECM - Flexible payment options. More adaptable loan options for long-term retirement planning.

FIXED-RATE HECM - Most popular for those paying off existing mortgage debt who want the stability of a fixed rate.

• $0 Monthly Payment Option
• No Minimum Credit Score
• No Minimum Reserves
• Non-recourse loan

FIXED-RATE JUMBO (LUMP SUM) - Access equity in a high-value home.

ADJUSTABLE-RATE JUMBO (LINE of CREDIT) - Access equity in a high value home. Flexible line of credit allows for a draw period.

• Supports home values up to $10 million
• $4,000,000 Lending Limit
• Lump-Sum Fixed Rate Payment Option

 For more details. Call Us Today!  (949) 365-5737

To be eligible for a Home Equity Conversion Mortgage (HECM) reverse mortgage, the Federal Housing Administration (FHA) requires that all homeowners be at least age 62. The home must be owned free and clear OR all existing liens must be satisfied with proceeds from the reverse mortgage. If there is an existing mortgage balance, it can be paid off completely with the proceeds of the reverse mortgage loan at closing. Generally there are no credit score requirements for a reverse mortgage.

Homeowners "ALWAYS" maintain title and may remain in the home indefinitely, even if the loan balance becomes greater than the value of the home – as long as the borrower meet the loan obligations. Generally speaking, as long as at least one homeowner lives in the home as their primary residence and continues to pay required property taxes, homeowners insurance and maintains the home in accordance with FHA requirements, a reverse mortgage loan will not become due.

Heirs can take action. In the event of death or in the event that the home ceases to be the primary residence for more than 12 months, the homeowner’s estate can choose to repay the reverse mortgage loan or put the home up for sale.

If the equity in the home is higher than the balance of the loan when the home is sold to repay the loan, the remaining equity belongs to the estate.

If the sale of the home is not enough to pay off the reverse mortgage, the lender must take a loss and request reimbursement from the FHA. No other assets are affected by a reverse mortgage. For example, investments, second homes, cars, and other valuable possessions cannot be taken from the estate to pay off the reverse mortgage.

Heirs typically have 30 days to pay off the loan balance. In many cases, you may be able to request an extension of up to a year.

If you inherit a property with a reverse mortgage attached, you should get in touch with the primary lender as-soon-as-possible.

The amount of funds available through a Reverse Mortgage generally depends on a few factors:

Age: borrowers must be 62 yrs of age or older, (the youngest spouses age) and are required to take part in a approved counseling session before taking out a reverse mortgage.

Current interest rate.

Appraised Value - though the amount you’ll qualify for depends on the appraised value of your home, your existing mortgage balance and other financial details.

Government HUD - Home Equity Conversion Mortgage (HECM) and/or proprietary imposed lending limits. Proprietary reverse mortgages are offered by private reverse mortgage lenders and are specific to that company. These loans are often referred to as jumbo reverse mortgages, as they can exceed the limits set by HUD for HECM loans.

The Home Equity Conversion Mortgage (HECM) lets you choose among several options to receive the proceeds from a reverse mortgage.

A single lump-sum payment: You receive one large payment upfront after closing. This option is only available on fixed-rate reverse mortgages.

Monthly payments: You receive a monthly payment for a specific number of months (called term payments) or for as long as the house is your primary residence (called tenure payments).

A line of credit: You can withdraw funds as you need them. Meanwhile, the unused principal balance grows over time based on your interest rate. For example, assuming you get a $200,000 line of credit with a 4% interest rate, if you don't use any of that money, the principal loan amount would go up to roughly $300,000 over the next 10 years. While this does mean you owe more money than you did at the start, you also have access to a larger line of credit in the long run. This means that you can potentially receive a larger amount of funds than originally requested over the life of the loan.

A combination of the above: You can also choose to combine monthly term or tenure payments with a line of credit. You can’t combine the lump sum with any other payment option, though.

Generally a home equity loan, a second mortgage, or a home equity line of credit (HELOC) have strict requirements for income and creditworthiness. Also, with other traditional loans the homeowner must still make monthly payments to repay the loans. A reverse mortgage generally has no credit score requirements and instead of making monthly mortgage payments, the homeowner receives cash from the lender.

With a reverse mortgage the amount that can be borrowed is determined by an FHA formula that considers age, principal limit, the current interest rate, and the appraised value of the home. Typically, principal limits and the value the home determine the loan amount.

To summarize the key differences, with traditional loans the homeowner is still required to make monthly payments, but with a reverse mortgage the loan is typically not due as long as the homeowner lives in the home as their primary residence and continues to meet all loan obligations. With a reverse mortgage no monthly mortgage payments are required, however the homeowner is still responsible for property taxes, insurance, and property maintenance.

It is mandatory for every borrower to take a (HECM) Home Equity Conversion Mortgage counseling class. The counselor is an independent third party that is there to assist you in understanding your choices. Counseling appointments are held over the telephone and are available in almost every language. Counseling is required by the Department of Housing and Urban Development (HUD). 

Interest accrues on the money you borrow.

Reverse mortgage borrowers are approved for a maximum loan amount or Principal Limit but how you take the money and how quickly you accrue interest under the program is entirely up to you. The more money you borrow and the earlier in the loan you borrow it, the more interest will accrue on the loan.

Reverse Mortgages are strictly governed and monitored by the federal government. FHA insures every loan to make sure you are protected and guarantees you never owe more than the value of your home and always have access to your proceeds.