FHA Reverse Mortgages Are Cash Out Refinance For Seniors
This BLOG On FHA Reverse Mortgages Are Cash Out Refinance For Seniors Was Updated On March 26, 2017
Homeowners who are retired and on limited fixed income such as pension or social security income with not enough income to qualify for a traditional cash-out FHA or Conventional Loan, then FHA Reverse Mortgages may be the perfect loan program for them. The only requirement is that homeowners have enough equity in their homes.
What Are FHA Reverse Mortgages?
FHA Reverse Mortgages is also called a home equity conversion mortgage (HECM). FHA Reverse Mortgages are special types of refinance mortgage loans that makes homeowners age 62 or older possible to tap the equity in their homes. There are various options of distribution plans reverse mortgages offer to borrowers. Disbursements from reverse mortgages are the following:
- It may be a lump sum that they can take out at once and use it for any reason
- It may be stream of regular payments paid over the life of the homeowner
Unlike traditional home equity loans, there are no monthly payment requirements on FHA reverse mortgages. Homeowners do not have to pay a single mortgage payment as long as they occupy the home. The home to be eligible for FHA reverse mortgages need to be an owner occupant home.
Reverse mortgage borrowers must have to reside in the home they are taking out the reverse mortgage from and need to stay current on their property taxes and insurance.
Disbursements may be used to supplement social security, meet unexpected medical expenses, make home improvements, and more. The equity built up over years of home mortgage payments can be paid to the reverse mortgage borrower. But unlike a traditional home equity loan or second mortgage, no repayment is required until you no longer use the home as your principal residence or you decide to sell your home.
FHA Reverse Mortgages Eligibility Requirements
Reverse mortgage borrowers and any co-borrowers, must be at least 62 years old to qualify.
Here are the basic requirements:
- Reverse borrowers need to own their home free and clear or have a very low mortgage balance.
- The home must be your principal residence and may be a single-family or 2 to 4 unit dwelling.
- Condominiums and Planned Unit Developments (PUDs) may be eligible if they are in FHA-approved developments.
- Borrowers do not need a job to qualify for reverse mortgages.
- Borrowers are required to attend and complete a Federal required housing counseling course.
Unlike ordinary loans, a reverse mortgage does not require repayment as long as as you live in your home. Principal, plus interest is recovered when the home is sold. The remaining value of the home goes to you or your survivors.
The maximum amount of a reverse mortgage varies by geographic area and changes frequently. Normally the maximum value of the subject property cannot exceed $650,000. If it does, they will not go beyond the $650,000 value. The amount borrowers can borrow (LTV) depends on their age. The older a borrower is, the more they can borrow. Please contact us at The Gustan Cho Team at Nationwide Mortgage for the maximum mortgage amount for your area.
There are five options reverse mortgage borrowers can choose from for receiving cash disbursements. They are not limited to a single option. As their needs changes, reverse mortgage borrowers may change from among the following reverse mortgage disbursement options:
- 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 amounts of your choosing until the line of credit is exhausted.
- Modified Tenure – combination of line of credit with monthly payments for as long as you remain in the home.
- Modified Term – combination of line of credit with monthly payments for a fixed period of months selected by borrowers.
Remember that repayment of FHA reverse mortgages does not start until the homeowner no longer occupies the home as their principal residence. Homeowners of FHA reverse mortgages will be responsible for making insurance and property tax payments but payments on the reverse mortgage do not begin until they no longer occupy your home.
It is mandatory that a reverse mortgage borrower seek professional credit counseling prior to closing on a reverse mortgage refinance loan.