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Seniors

A Home Equity Conversion Mortgage (HECM) is the formal name of the federally insured loan that many commonly refer to as the 'reverse mortgage' loan. The Home Equity Conversion Mortgage program is administered by H.U.D. (The Department of Housing & Urban Development) and may help qualified homeowners 62 and older enhance their cash flow during retirement. There may also be private jumbo reverse mortgages available in your area for higher-valued properties (for home values up to $10 million) which are not insured by FHA. Jumbo reverse mortgage loans are unique and their features and requirements vary by the lender offering them.

How do I Potentially Qualify for a Reverse Mortgage Loan?

To become eligible for a reverse mortgage, you must be at least 62 years old and own your home. You must have enough equity in the house to pay off any outstanding balances, and your home must be occupied as your principal residence. Minimal income and credit standards must also be met. Imagine living in your home without a traditional monthly mortgage payment² (the borrower is still responsible for paying property taxes, homeowner’s insurance and maintaining the property to HUD standards), or instead, enjoying monthly loan proceeds from the years you’ve invested in your home.  A reverse mortgage is a unique mortgage designed for homeowners 62 and older. You may enjoy access to part of the value of your home and the freedom and comfort of the home you’ve known for so many years. It’s your home, now you can put it to work for you. Reverse mortgage borrowers retain ownership and title to their home². It’s yours just as it was before, but now you may benefit from the equity that’s been building in your home for years. In addition, HECM (Home Equity Conversion Mortgage) reverse mortgage loans give you peace of mind since it is insured by the Federal Housing Administration (FHA); and your home and property are the only assets that secure the loan. In order to retain the home when the reverse mortgage becomes due, the heirs may choose to keep the home by paying off the current outstanding loan balance or 95% of the home's appraised value, less customary closing costs and real estate commissions. After you get a reverse mortgage on your primary residence, repayment is not due until the home is sold, the last borrower passes away or permanently leaves the home². Borrowers also must keep the home in good condition, pay property taxes and keep homeowner’s insurance coverage to avoid the loan becoming due and payable. Those seeking a reverse mortgage are required to obtain counseling from an independent HUD-approved third-party counselor. While proceeds from a reverse mortgage are not subject to personal income taxation, borrowers should seek tax advice on how proceeds may affect government needs-based programs such as Medicaid and Medi-Cal.³ Qualification for the loan will be determined by an underwriter.

²There are some circumstances that will cause the loan to mature and the balance to become due and payable. The borrower is still responsible for paying property taxes, homeowner’s insurance and maintaining the property to HUD standards. Failure to do so could make the loan due and payable. Credit is subject to age, income standards, credit history, and property qualifications. Program rates, fees, terms, and conditions are not available in all states and subject to change.

³Borrowers should seek professional tax advice regarding reverse mortgage proceeds and consult with their benefit agency.

The Facts

²There are some circumstances that will cause the loan to mature and the balance to become due and payable. The borrower is still responsible for paying property taxes, homeowner’s insurance and maintaining the property to HUD standards. Failure to do so could make the loan due and payable. Credit is subject to age, income standards, credit history, and property qualifications. Program rates, fees, terms, and conditions are not available in all states and subject to change.

³Borrowers should seek professional tax advice regarding reverse mortgage proceeds and consult with their benefit agency.

 

 

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