HECM Loan Amounts To $636,150.
Jumbo Reverse Mortgage Loans To $2,250,000 ​Jumbo is not a HECM loan and is not insured by FHA
What is a Reverse Mortgage Loan
A Home Equity Conversion Mortgage (HECM), commonly known as a
reverse mortgage, is a Federal Housing Administration (FHA) insured
loan. A HECM enables seniors to access a portion of their home's
equity to obtain tax free loan funds without having to make monthly mortgage payments as long as they live in the home as their primary residence, continue to pay required property taxes, homeowners insurance and maintain the home according to FHA requirements and otherwise comply with loan terms.
Eligibility for a reverse mortgage loan
To be eligible for a HECM reverse mortgage loan, one homeowner must be at least 62 or older and must meet financial eligibility criteria
as established by HUD. The home must be owned free and clear or
all existing liens, mortgage's and mandatory obligations would need
to be satisfied through the reverse mortgage loan proceeds.
Eligible home types
Many home types are eligible: one to four units owner-occupied
homes and approved townhomes, condominiums and manufactured
homes.
Difference between a reverse mortgage and a home equity loan
With a HECM, reverse mortgage loan, the borrower doesn't have to make any monthly mortgage payments. Whereas borrowers with a Home
Equity Line of Credit (HELOC) must pay back any funds borrowed,
plus interest, within the payment period. As with any mortgage loan,​HECM borrowers must continue to pay property taxes and homeowners
The interest rates for a HECM versus a HELOC are fairly comparable.
Upfront costs for a HECM reverse mortgage loan are some-what higher
than they are for a HELOC. Unlike a HELOC, however, there are no
draw or utilization fees with a HECM. In addition, HECMs do not have
a set draw period or a limit on the number of draws after the first
12 month disbursement period. Therefore, a HECM gives borrowers
the flexibility to use the line of credit any time and in any amount, until
the line of credit is exhausted. The HECM Loan is also available as a
When the loan becomes due
The loan generally does not have to be repaid until the last surviving
homeowner on title permanently moves out of the property or passes away. At that time, the estate can repay the balance of the reverse
mortgage loan and keep the home or sell the home to pay off the balance. The borrower must also live in the house as their primary
residence, continue to pay required property taxes, homeowners
insurance and maintain the home according to FHA requirements,
Estate inheritance
If the equity in the home is higher than the balance of the loan when
the house is sold, the remaining equity belongs to the heirs/estate.
The estate is not personally liable if the home sells for less than the
balance of the reverse mortgage loan. 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.
Available loan proceeds
The amount of funds that you can receive depends on many factors,
such as: age, current interest rate, and the lesser of the appraised
value of the home, the sale price or the FHA maximum lending limit.
The funds available to you may be restricted for the first 12 months
after loan closing, due to HECM requirements. In addition, the borrower may need to set aside additional funds from the loan proceeds for taxes and insurance. Generally, the higher the value of the home, the higher the loan amount will be, up to FHAs maximum lending limits.
Distribution of money from a reverse mortgage loan
There are several ways to receive the proceeds from a reverse
mortgage loan:
-Lump sum – a lump some of cash at closing
-Tenure – equal monthly payments as long as the homeowner lives
in the home
-Term – equal monthly payments for a fixed period of months
-Line of Credit – draw any amount at any time until the line of credit
is exhausted.
-Any combination of those listed above
Borrowers may access the greater of approximately 60% of the
principal limit amount or all mandatory obligations, as defined by the
HECM requirements, plus an additional 10% during the first 12 months
after loan closing for all adjustable rate loans. For fixed rate loans,
the additional 10% may only be taken at loan closing. The combined total of mandatory obligations plus 10% cannot exceed the principal limit amount established at loan closing. The principal limit is the amount of funds available to the borrower through a HECM loan.
Jumbo Reverse Mortgage Loan – Similar to standard reverse mortgage loan, owners with more expensive properties can now access more of their home equity that could help fund a more comfortable and secure retirement while keeping productive assets invested and use funds for any reason, travel, help cover medical or in-home care expenses, property improvements, and cash reserves for a long and enjoyable retirement, and no monthly payments as long as you live in the home as your primary residence.
If borrower does not meet loan obligations such as property taxes
and insurance, then the loan will need to be repaid.
This material is not from HUD or FHA
and has not been approved by HUD or a goverment agency.
Not tax advise. Consult a tax professional.
