What is a REVERSE MORTGAGE ?
In its most basic sense, a Reverse Mortgage is any loan secured by a home, where repayment is deferred to a later date. Generally, a Reverse Mortgage is paid back when the home sells in the future.
What is a Home Equity Conversion Mortgage (HECM) ?
The HECM is the only Reverse Mortgage that is insured by the Federal Government. Because of their involvement, lenders can offer these non-recourse loans at low interest rates, and offer very generous financing terms. With this program, the homeowner continues to own title to the home.
What are KEY ELIGIBILITY REQUIREMENTS ?
Lender guidelines may vary slightly. However, the key eligibility requirements should remain the same; the youngest borrower must be at least 62, and they must own and occupy the subject property.
What are MANDATORY OBLIGATIONS ?
Mandatory Obligations are items that must be paid off at closing. These generally include mortgages against the property, closing costs, initial mortgage insurance premiums, etc. The vast majority of borrowers finance these items into the loan.
What is the NON-RECOURSE feature ?
Because Reverse Mortgages are Non-Recourse Loans, the homeowner is not responsible for mortgage debt that accrues beyond the home’s value. FHA guarantees that the borrower will not owe more than the home is worth at the time it is sold.
How is the PRINCIPAL LIMIT calculated ?
Principal limits are determined by referencing principal limit factor (PLF) tables of relevant ages and expected rates (ER). For every age from 18 to 99 combined with an expected rate between 3% and 18.875%, there is a PLF shown as a percentage.
What are the PRODUCT OPTIONS ?
The HECM-Fixed is popular because the rate stability is attractive to many borrowers. Meanwhile, the currently low interest rates and payout options on the HECM-ARMs are compelling for others.
What are the PAYOUT OPTIONS ?
The Fixed rate HECMs are only available as a Single Disbursement Lump Sum Payment. The adjustable rate (ARM) option is much more flexible with options known as initial draw, line of credit, tenure payment, term payment, or a combination of these options.
What are the OBLIGATIONS of the homeowner ?
Monthly principal and interest payments are NOT ongoing obligations for the homeowner. But it is important that they occupy the home and pay all property charges including property taxes, homeowners insurance premiums, and association dues.
What is HECM FOR PURCHASE ?
With a HECM for Purchase, older homeowners can more easily relocate to be closer to family, downsize to a more manageable home/townhouse/condo, or even upsize to a retirement dream home on the beach, golf course, or active adult community.