FREQUENTLY Asked Questions
It depends on your definition of ‘good’. Not to be flippant but the loan is designed to help those who can’t qualify for a standard mortgage because their income is too low to qualify. People older than 62 can access equity in their home up to roughly half of its value.
It is great to own your home free and clear or have a lot of equity built up. The problem is you cannot access the equity unless you sell the home or have enough income to qualify for a 1st mortgage or a Home Equity Line of Credit. Qualifying can be impossible for people living on a fixed income.
The idea behind this loan is to allow older people, whose major or only savings is represented by the equity in their home, the ability to stay in their home and access that equity. The fact is that many older Americans don’t have sufficient retirement income or savings to make either payments on a mortgage or cover living expenses. They have paid off their home but now can’t afford to live there.
The Reverse mortgage allows our seniors the option of using their savings as represented by their home equity to make their mortgage payments for them. The way you make payments is flexible, you have the option of paying some of it or all of or none of it every month. If you don’t choose to pay from your available savings you can elect to make no monthly payment and the amount of that payment will be added to your mortgage balance. You can continue to make payments from your equity for as long as you live in the home, even if you owe more than it’s worth.
It’s important to remember that with a Reverse Mortgage you still own your home exactly like you do when you have a standard mortgage.
The Reverse Mortgage Program is overseen and insured by FHA, the Federal Housing Administration and is officially named the Home Equity Conversion Mortgage (HECM).
Below is some information from the Hud.Gov web page.
If you’d like to talk about this program and if it is right for you contact me here:
The following eligible property types must meet all FHA property standards and flood requirements:
For fixed interest rate mortgages, you will receive the Single Disbursement Lump Sum payment plan.
Mortgage Amount Based On
The amount you may borrow will depend on:
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.
You can pay for most of the costs of a HECM by financing them and having them paid from the proceeds of the loan. Financing the costs means that you do not have to pay for them out of your pocket. On the other hand, financing the costs reduces the net loan amount available to you.
The HECM loan includes several fees and charges, which includes: 1) mortgage insurance premiums (initial and annual) 2) third party charges 3) origination fee 4) interest and 5) servicing fees. The lender will discuss which fees and charges are mandatory.
You will be charged an initial mortgage insurance premium (MIP) at closing. The initial MIP will be 2%. Over the life of the loan, you will be charged an annual MIP that equals 0.5% of the outstanding mortgage balance.