| HECM Reverse Mortgage |
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.
| HECM (home equity conversion mortgage) |
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.
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.
