Reverse Mortgages

San Diego Reverse MortgageA San Diego Reverse Mortgage is a unique loan created for homeowners 62 years of age and older. A reverse mortgage allows senior homeowners to convert part of their home equity into liquid funds without having to sell their home, give up title, or get new conventional mortgage financing with monthly payments.

Unlike a traditional mortgage where the homeowner make payments, a reverse mortgage has no payments and can make money available to you to payoff current loans or utilize for living expenses. One of the greatest benefits of a reverse mortgage is the fact that there are no mortgage payments due as long as you live in your home.

Reverse mortgages differ from traditional loans in the following ways:

  • Reverse mortgages do not rely on calculating a debt to income ratio or credit scores to qualify
  • You can use the reverse mortgage to provide additional monthly income
  • You are protected and insured against ever owing more than the value of your home, these are non-recourse loans
  • You never give up title to your house

Reverse Mortgage Programs:

HECM (Home Equity Conversion Mortgage) refers to a reverse mortgage insured by HUD and the FHA.  The FHA’s HECM program contains special requirements like a HUD counseling session and a property value ceiling. The HECM property value ceiling is currently at $970,800 in San Diego County. This means that if the home is appraised for more, the calculation of the loan amount will start at $970,800 instead of the higher appraised value.

The HECM program has undergone many changes recently and a number of options have been removed. Currently, there is a fixed rate option or an adjustable rate option. Either of these options can be used for a refinance or to purchase a new home utilizing a reverse mortgage.

Fixed Rate Option

The fixed rate HECM eliminates the uncertainty of adjustable-rate mortgages. With the HECM Fixed Rate loan, the borrower has the comfort of knowing exactly what their interest rate will be for the life of the loan, the certainty that the rate will never increase, and will know exactly how much interest will accumulate over the life of the loan. With this option borrowers will have the comfort of knowing exactly how much their estate will owe at the time their house is sold.  Any available funds have to be dispersed at closing.

Adjustable Rate Option

The adjustable rate reverse mortgages have by far been the most popular reverse mortgage loan to date. They are based off of the CMT Index and the rate can adjust monthly. The adjustable option allows the funds available to be paid out as a lump sum, line of credit, tenure payment, or any combination.  This option may make more money available to the homeowner over the long term.

Reverse Mortgage for Purchases

Starting in January 2009, FHA began insuring reverse mortgage loans for seniors to purchase homes. This program allows a senior to obtain a reverse mortgage, which does not have required monthly mortgage payments, to cover a large percentage of the purchase price.  This allows seniors to keep more of their cash liquid for living expenses that they may have used to buy the house outright.

The reverse mortgages for purchases are based on appraised value and Borrowers age. The older you are, the more money you would qualify for.

Reverse Mortgages for Refinances

A reverse mortgage can also be refinanced in the future.  This may be a benefit because as the property increases in value and the borrower gets older, more funds may potentially be available.  A client can also decide to switch from an adjustable to a fixed or vice versa.

Jumbo Proprietary Reverse Mortgages

Jumbo reverse mortgages allow homeowners with higher valued homes to access a larger portion of their equity or purchase a higher valued home.  This program does not have the home value limit that the FHA HECM program does.  The jumbo reverse mortgage can also be used on non-FHA approved condos and carry lower closing costs because they do not have mortgage insurance.  Yet, they have all the same safety features of the HECM and come in Fixed or Adjustable rate options with a line of credit.  Jumbo reverse mortgages can also be used as early as age 55.

Leave a Reply

Your email address will not be published. Required fields are marked *