Step 4 - Reverse Mortgage Information

A "HECM" (Home Equity Conversion Mortgage) is the name for HUD/FHA's Reverse Mortgage program. This program enables eligible Seniors to access a portion of the equity in their primary residence.

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Seniors can use a HECM to purchase a primary residence if they have an (often significant) amount of cash on hand to pay the difference between money received from the HECM and the sales price plus closing costs on the property.

Related Terms include: Reverse Annuity Mortgages, Reverse Equity Mortgages, Reverse Home Mortgages and Senior Reverse Mortgage.


- - - - - - - - WHY GET A REVERSE MORTGAGE - - - - - - - -

Some of the main reasons Seniors get a Reverse Mortgage are:

The Senior(s) must:

The amount Seniors receive is based on a calculation that uses:

Other program highlights:

The following reverse mortgage information contains a list of allowed HECM property types:

In addition the property must meet all FHA property standards and flood requirements.


- - - - - - - - - - PAYMENT OPTIONS - - - - - - - - - -

This reverse mortgage information is on HECM payment options:

Loan Repayment reverse mortgage information follows. A Reverse Mortgage HECM does not require repayment as long as the home remains one of 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 borrowers or their heirs. The Borrowers can never owe more than their home's value at the time of a sale of the property.

- - - - - - - - -INCOME REQUIREMENTS - - - - - - - - -

There are no asset or income requirements in order for Borrowers to be eligible for a HECM. In addition, there is no limit on the value of homes qualifying for a HECM. The value of the home will be determined by an appraisal during the loan process.

- - - - - - - - - - - HECM COSTS - - - - - - - - - - -

Borrowers can pay for most of the costs of a HECM by financing them and having them paid from the proceeds of the loan. Financing the costs means Borrowers do not have to pay for them out of their pocket but they will get less at loan closing.

The HECM loan includes several fees, including an origination fee, closing costs, mortgage insurance premium, interest and servicing fees.

Origination Fee

Borrowers will pay an origination fee to compensate the Lender for processing their HECM loan. A Lender can charge a HECM origination fee up to $2,500 if the home is valued at less than $125,000. If the home is valued at more than $125,000 Lenders can charge 2% of the first $200,000 of the home's value plus 1% of the amount over $200,000. HECM origination fees are capped at $6,000.

Closing Costs

Closing costs from third parties involved in the loan process can include an appraisal, title search and insurance, surveys, inspections, recording fees, mortgage taxes, credit checks and other fees.

Mortgage Insurance Premium (MIP)

The Borrower is charged for HECM insurance in an upfront MIP at loan closing which will be 2% of the lesser of the home's value or the FHA HECM mortgage limit (currently $625,500). The Borrower will also be charged a monthly MIP that equals 1.25% of the mortgage balance.

Servicing Fee

Lenders or their agents provide servicing throughout the life of the HECM. Servicing includes sending the Borrowers account statements, disbursing loan proceeds and making certain that Borrowers keep up with loan requirements such as paying taxes and insurance. HECM lenders may charge a monthly servicing fee of no more than $30 if the loan has an annually adjusting interest rate and $35 if the interest rate adjusts monthly. At loan origination, HECM lenders set aside the servicing fee and deduct the fee from your available funds. Each month the monthly servicing fee is added to your loan balance.

Interest Rate

HECM Borrowers can choose an adjustable interest rate or a fixed rate program. If they choose an adjustable interest rate, the Borrowers may choose to have the interest rate adjust monthly or annually. Lenders may not adjust annually adjusted HECMs by more than 2 percentage points per year and not by more than 5 total percentage points over the life of the loan. FHA does not require interest rate caps on monthly adjusted HECMs.


- - - - - - - - - REPAYMENT TRIGGERS - - - - - - - - -

A HECM loan must be repaid in full when:

Main Reverse Mortgage Pros and Cons

Pros

Cons

For more reverse mortgage information on the current programs that are offered please follow this link Reverse Mortgage Information on Programs (Click Here)

For even more Reverse Mortgage Information try this link from a trusted source wikipedia More Reverse Mortgage Info (Click Here)

Try this HUD FAQs link as well HUD Reverse Mortgage FAQs (Click Here)

To see a FREE insiders list of the nations top 100 reverse mortgage lenders click the following link FREE list of the Top 100 Reverse Mortgage Lenders (Click Here)