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Reverse Mortgage Information
Information For Seniors Homeowners about the FHA Home Equity Conversion Mortgage
Use The Equity In Your Home To:
- Eliminate Your House Payment
- Supplement Your Income
- Pay Household And Medical Bills
- Finance A New Car
- Pay For Your Vacation
The Home Equity Conversion Mortgage ("HECM") Loan. It's Money From Home!
If you're a senior citizen and own your home, here's a way to get cash back
from all the equity you've built up in the value of your house.
It's called a Home Equity Conversion Mortgage, or "HECM" for short. The HECM
is a relatively new type of loan that is government-insured and highly recommended
for many senior homeowners.
Upon approval, your HECM loan can be set up to provide monthly cash to supplement
your Social Security and retirement income. Best of all, you won't have to make
any monthly payments for as long as you live in your home. You can also choose
to receive special cash amounts for home improvements, or for any other purpose
you desire.
- Is a HECM loan right for you?
- Our brochure will help you begin to find out. One of the best aspects of
the government-supported HECM program is the fact that trained counselors
will advise you about all the alternatives and options. So be sure to make
a note of any questions you might have. If you are eligible for a HECM loan
and wish to apply for one, you can count on Farwest Mortgage Bankers to put
all our experience to work for you!
- How Does An HECM Loan Work?
- Think of it as an "advance" on the equity in your home. An HECM loan puts
to use the equity in your home as collateral and pays you in cash, usually
in regular monthly installments, from this equity. When your home is sold,
or when you move out, you or your estate will repay that cash, plus interest
to the lender. All proceeds in excess of the amount owed belong to you or
the estate.
- Who Is Eligible?
- You must be at least 62 years old and either own your home free and clear,
or have just a small balance remaining on your mortgage. If there is a joint
borrower, he or she must be at least 62 years old as well. You must also agree
to a free informational session with a HUD-approved counseling agency before
you apply. This provides an important step toward bring sure that an HECM
loan is for you.
- How Safe Is An HECM Loan?
- Once you've gone through the information session and application process,
you'll recognize that an HECM loan is the safest mortgage you can get. You
can't outlive the loan or be obliged to make payments, as long as you remain
in your home. That fact is guaranteed by the U.S. Department of Housing and
Urban Development (HUD).
- How Much Money Will I Receive?
- That depends on your age, the appraised value of your house, the current
interest rate, and the number of years you're likely to live in your home.
You can choose to be paid in a lump sum or in monthly payments. In either
case, the older you are, the more you'll be able to receive each month:
| Age |
Monthly Benefit |
| Maximum Claim Amount $160,950 ... |
| 65 |
$408 |
| 75 |
$612 |
| 85 |
$988 |
| ... or you may choose a net lump sum or line of credit
benefit of |
| 65 |
$55,000 |
| 75 |
$76,400 |
| 85 |
$101,000 |
- Tenure Monthly Payment Plan
- The Maximum Claim Amount is the lesser of the appraised value of your house
or the maximum principal amount for a one-family residence that can be insured
by FHA in your area. These figures are approximate and assume an interest
rate of 8%, financing of closing costs and the initial mortgage insurance
premium, and deduction of a $25 monthly service fee.
- Are There Fees or Charges Involved In Getting An HECM?
- As with most other mortgage loans, you will have to pay an origination
fee, closing costs, and a mortgage insurance premium. Some of these fees may
be financed and added to your initial loan balance, so you won't have to pay
for them out of pocket.
- Will I Have To Pay Anything Else During The Life of My Loan?
- Not a penny, as long as you live in your home. That's the simple beauty
of an HECM loan. If you should die, or move, or sell your home, then the total
outstanding balance on your loan will be due. HECM loans are usually repaid
out of proceeds from the sale of your home.
- How Can I Use The Money I Receive?
- Any way you wish. You can establish a line of credit to draw from at any
time. You can get immediate cash for special purposes such as repairs, improvements,
unexpected medical expenses, or even to buy a car. Or you can elect to receive
regular monthly payments to help supplement your present income. All payments
to you are disbursed by Providential Home Income Plan, an FDIC insured bank.
- Will I Still Have An Estate To Leave To My Heirs?
- That depends on how long you live in your home, but the answer is usually
"yes". When your house is sold, everything left after the loan is repaid will
go to your estate. Or, your heirs may decide to apply for a new mortgage,
so that they may keep the home.
- How Do I Apply For An HECM Loan?
- The best way to get started is to contact The Suburban Group andand ask
to speak to a HECM loan specialist. We'll provide you with the name of a HUD-approved
counselor near you, and we'll offer an easy-to-understand explanation of how
your HECM loan might be set up.
If an HECM loan turns out to be right for you, it can make a big difference
in your life.
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