HECMs for Seniors

by | Apr 14, 2016 | Financial Services

If you’re a homeowner who is at least 62 years old and has paid off the mortgage or paid down a significant amount and currently occupy the home, you might participate in the Federal Housing Administration’s HECM (Home Equity Conversion Mortgage) plan. The HECM is the Federal Housing Administration’s reverse mortgage plan, which allows you to withdraw a part of your property’s equity.

Also, you may utilize HECM reverse mortgages to buy the main residence if you have the ability to utilize cash at hand to pay the difference between the proceeds of the HECM and sales price, in addition to the closing costs for the home you’re buying.

How the Plan Works

There are several factors to take into consideration prior to determining whether a HECM is right for you. To help in this process, you have to meet with a HECM counselor to talk over eligibility requirements for the program, financial implications, as well as alternatives to getting a HECM and loan repayment. Also, counselors will talk about provisions for the mortgage becoming payable and due. Upon the HECM counseling completion, you ought to have the ability to make an informed, independent decision about whether the product will meet your specific needs.

If one meets the eligibility criteria, it’s possible to complete an application for a reverse mortgage by calling an FHA-approved lender. This lender will talk over other HECM program requirements, like first-year payment limits, available options for payment, repayment terms, and the process for loan approval.

Borrower Requirements

You have to:

*   be 62 years old or more,
*   own the home outright or paid down a significant amount,
*   occupy the home as your main residence,
*   not be delinquent in any federal debt,
*   have the financial resources to continually make timely payments of recurrent property charges, like homeowner association fees, insurance, property taxes, etc., and
*   participate in a consumer data session provided by an HECM, HUD-approved counselor.

Property Requirements

Eligible properties have to meet all Federal Housing Administration flood requirements and property standards:

*   ingle family house or 2-to-4-unit house that has one unit occupied by a borrower
*   HUD-approved condo project
*   Manufactured house which meets requirements of FHA

Mortgage Amount is Based On

The quantity you might borrow depends upon:

*   The age of youngest borrower or qualified non-borrowing spouse
*   Present interest rate
*   Lesser of the appraised value or HECM reverse mortgages Federal Housing Administration mortgage limitation of $625,500 or sales price

If there’s more than a single borrower and there isn’t any qualified non-borrowing spouse, the youngest borrower’s age is utilized to decide the amount it’s possible to borrow.

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