Benefits

Use a HECM Reverse Mortgage to Supplement Income

The main reason most seniors take out a reverse mortgage is to supplement their income. For many seniors, Social Security is their ONLY source of income. While income for many seniors, as a couple might be sufficient, in a recent study published by Columbia Legal Services in Washington, it has been discovered that over 60% of seniors as individuals are surviving on less than $820 per month. For them, a reverse mortgage is a godsend.

Use a HECM Reverse Mortgage as an Emergency Fund

There are also a large number of people who are “getting by” on a month to month basis. However, they are not able to handle setbacks involved in owning and maintaining a home.

When furnaces break down, the paint starts to peel, water heaters go out, the roof needs repair, the carpet needs replacement, the body can no longer handle the responsibilities of home ownership such as lawn maintenance, housekeeping, etc. and the costs to hire such help cannot be budgeted, as well as property tax bills and homeowner’s insurance premiums, there simply isn’t enough money in the budget. A hand to mouth existence appears to be the norm for numerous seniors, but a HECM Reverse Mortgage can change all of that!

Use a HECM Reverse Mortgage to Pay Off an existing Mortgage

Many people take out a 30 year mortgage after reaching the age of 50. Trying to make a mortgage payment of even $300 to $500 per month on a fixed retirement income is a burden for many seniors.

For many people, a HECM Reverse Mortgage can provide enough funds to pay off an existing mortgage and free up additional cash for the homeowner. Use an example… Dropping the $1,200 monthly mortgage payment has made a tremendous difference in
his quality of life.

Use a HECM Reverse Mortgage to help a Relative

Often times a client wants to help their children or grandchildren. One client wanted to help her son purchase a home in Arizona. By taking out the HECM Reverse Mortgage, she was able to give her son enough money and with his own monies he was able to pay cash for his own place. A fringe benefit of this is that she gets to see her son enjoy a part of his inheritance, now.

Many clients choose to use a portion of their funds to help their college-aged grandchild with tuition and books. A HECM Reverse Mortgage has made this wish a reality.

Use a HECM Reverse Mortgage when a Spouse is in a Nursing Home

Use a HECM Reverse Mortgage for In Home Care

In Home care doesn’t necessarily mean nursing care. By using the benefits from a HECM Reverse Mortgage seniors are finding a source of monies to hire the extra help they need for housekeeping (to keep away grunge, dust in high places and their floors). This kind of help can be obtained on a semi-weekly basis for a very nominal cost. Or a gardener for lawn maintenance, while landscaping can be expensive, most seniors already have their yards completed but can no longer maintain it. A HECM Reverse Mortgage can supply the funds necessary for these needed services.

Use a HECM Reverse Mortgage to buy that Retirement Home

Use a HECM Reverse Mortgage to reposition income producing headaches

As you can see, the power of this financial tool, known as the
HECM Reverse Mortgage, is only limited to the imaginations and
differing situations of the individuals involved.

Steps for a RM

Steps

From beginning to end, the Reverse Mortgage process can take as little as 5 weeks, but in some circumstances can take
longer.

STEP ONE

Decide Whether a HECM is Right for YOU.

With the vast amount of MISinformation that Reverse Mortgages have attracted in the past, it is important to talk with a specialist that can answer ALL your questions. Meet with an experienced HECM Specialist or Reverse Mortgage Loan Officer that is willing to sit down with you, your family, friends and/or advisors, all wherever you are most comfortable.

Deciding on a H.E.C.M. may be one of the biggest retirement decisions you make and may not be easy to make alone.

STEP TWO

Receive HUD-Approved Counseling.

You must provide a Certificate of Counseling to your HECM Specialist or Reverse Mortgage Loan Officer prior to completing a HECM Reverse Mortgage application. HUD will allow your counseling to be done via telephone if you prefer.

Your Reverse Mortgage Loan Officer will provide you with a list of all HUD approved counselors in your State. Your Reverse Mortgage Loan Officer may assist in scheduling your

counseling session, if you request.

STEP THREE

Submit an Application.

Schedule an interview with a Reverse Mortgage Loan Officer that is willing to meet with you either in your home, their office, or wherever you are most comfortable.

STEP FOUR

Receive FHA Certified Appraisal.

Your benefits are based on the value of your home, which must be certified by a licensed FHA Certified Appraiser. The appraiser will determine if your home meets HUD equirements. If any deficiencies are found they must be corrected either before closing or within nine-months, for most repairs.

STEP FIVE

Wait for Lender Approval.

This step is simply time consuming. The lender is responsible to review your file to ensure it meets FHA approval. With the numerous regulations, set forth by the FHA, it is no wonder
that this can take a while.

STEP SIX

Sign Final Loan Documents.

Once approved, you will be required to sign, and have notarized, the final loan greements. Be sure to ask that this be done in the comfort of your home, as it can be lengthy. A copy of all documents will be provided at the time of application and again at the time of final signing.

FINAL STEP

Receive Proceeds.

Three days after signing the final loan documents, the proceeds are released from escrow. By law, you must wait three days to ensure you haven’t changed your mind.

Fact Sheet

About the HECM Program:

The HECM FHA insured reverse mortgage can be used by senior homeowners age 62 and older to convert the equity in their home into monthly streams of income and/or a line of credit to be repaid when they no longer occupy the home. The loan, commonly known as HECM, is funded by a lending institution such as a mortgage lender, bank, credit union or savings and loan association. To assist the homeowner in making an informed decision of whether this program meets their needs, they are required to receive consumer education and counseling by a HUD-approved HECM counselor.

HECM counselors will discuss program eligibility requirements, financial implications and alternatives to obtaining a HECM and provisions for the mortgage becoming due and payable. Upon the completion of HECM counseling, the homeowner should be able to make an independent, informed decision of whether this product will meet their needs. You can also use this handy Reverse Mortgage Calculator to help you see if you qualify.

Homeowners who meet the eligibility criteria can complete a reverse mortgage application by contacting a FHA-approved lending institution such as a bank, mortgage company, or savings and loan association. If you need assistance locating a FHA-approved lender, you can request a listing of FHA-approved lenders from the HECM counselor or use HUD’s searchable listing.

Borrower Requirements:

• Age 62 years of age or older
• Own your property
• Occupy your property as primary residence
• Participation in a consumer information session given by an approved HECM counselor

Mortgage Amount Based On:

• Age of the youngest borrower
• Current interest rate
• Lesser of appraised value or the FHA insurance limit

Financial Requirements:

• No income or credit qualifications are required of the borrower
• No repayment as long as the property is the primary residence
• Closing costs may be financed in the mortgage

Property Requirements:

• Single family home or 1-4 unit home with one unit occupied by the borrower
• HUD-approved condominiums
• Manufactured homes and leased land
• Meet FHA property standards and flood requirements

How the Home Equity Conversion Mortgage Program Works:

Homeowners 62 and older who have paid off their mortgages or have only small mortgage balances remaining, and are currently living in the home are eligible to participate in HUD’s reverse mortgage program. The program allows homeowners to borrow against the equity in their homes. Homeowners can select from five payment plans:

• Tenure - equal monthly payments as long as at least one borrower lives and continues to occupy the property as a principal residence.
• Term - equal monthly payments for a fixed period of months selected.
• Line of Credit - unscheduled payments or in installments, at times and in amount of borrower’s choosing until the line of credit is exhausted.
• Modified Tenure - combination of line of credit with monthly payments for as long as the borrower remains in the home.
• Modified Term - combination of line of credit with monthly payments for a fixed period of months selected by the borrower.

Homeowners whose circumstances change can restructure their payment options for a nominal fee of $20.

Unlike ordinary home equity loans, a HUD reverse mortgage does not require repayment as long as the home is the borrower’s principal residence. Lenders recover their principal, plus interest, when the home is sold. The remaining value of the home goes to the homeowner or to his or her survivors. You can never owe more than your home’s value.

If the sales proceeds are insufficient to pay the amount owed, HUD will pay the lender the amount of the shortfall. HUD’s Federal Housing Administration (FHA) collects an insurance premium from all borrowers to provide this coverage.

The amount a homeowner can borrow depends on their age, the current interest rate, other loan fees and the appraised value of their home or FHA ’s mortgage limits for their area, whichever is less. Generally, the more valuable your home is, the older you are, the lower the interest, the more you can borrow.

For example, based on a loan with an interest rates of approximately 9 percent, and a home qualifying for $100,000, a 65-year-old could borrow up to 22 percent of the home’s value; a 75-year-old could borrow up to 41 percent of the home’s value; and, an 85-year-old could borrow up to 58 percent of the home’s value. The percentages do not include closing costs because these charges can vary.

There are no asset or income limitations on borrowers receiving HUD’s reverse mortgages.

There are also no limits on the value of homes qualifying for a HUD reverse mortgage. The value of the home will be determined by an appraisal. However, the amount that may be borrowed is derived from the lower of the appraisal amount or FHA mortgage limit for the area, which varies from $200,160 to $362,790. For Alaska, Guam, Hawaii and the Virgin Islands, the FHA mortgage limits may be adjusted up to 150 percent of the ceiling depending on the area. The FHA limits usually increase each year. As a result, owners of higher-priced homes can’t borrow any more than owners of homes valued at the FHA limit.

HUD’s reverse mortgage program collects funds from insurance premiums charged to the homeowners. Homeowners are charged an upfront insurance premium which is 2 percent of the maximum claim amount that may be borrowed plus a .5 percent annual premium.

Technical Guidance:

This program is authorized by the Housing and Community Development Act of 1987, Section 417, Public law 100-242 (12 U.S.C. 1715z-20). Program regulations are in 24 CFR 206. This program is administered by the Office of Single Family Program Development in HUD’s Office of Housing-Federal Housing Administration.

FAQ’s

Borrower Requirements:

• Must be age 62 years or older.
• Must own your property.
• Live in your property as primary residence.
• Participate in a consumer information session with a HUD-approved housing counseling agency.

Mortgage Amount Based On:

• Age of the youngest borrower.
• Current interest rate.
• Lesser of the appraised value or the FHA mortgage limit.

Financial Requirements:

• No income or credit qualifications are required of the borrower.
• No repayment as long as the property is the primary residence.
• Closing costs may be financed into the mortgage.

Property Requirements:

• Single family home or 2-to 4-unit home with one unit occupied by the borrower (which can also be FHA-approved condominiums or manufactured homes and leased land).
• Meet FHA property standards and flood requirements.

What types of homes are eligible?

Your home must be:

• A single family dwelling or a 2- to 4-unit property that you own and occupy.
• Townhouses.
• Detached homes.
• Units in FHA-approved condominium projects.
• Manufactured homes built on or after June 15, 1976 that
  have permanent foundations.

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