Reverse mortgages have been around for a long time. If you are just now thinking of using a HUD reverse mortgage to use some of the equity in your home, then there are seven reasons why you will want to read this article.
In the last few years the popularity of reverse loans has been growing. With the recent credit crisis all proprietary reverse mortgages have disappeared. However, the most popular reverse mortgage ever is still in existence; the HUD reverse mortgage. HUD stands for US Dept. of Housing and Urban Development. The FHA or Federal Housing Administration is part of HUD. The HUD reverse mortgage is known as the HECM (Home Equity Conversion Mortgage). Here is a list of seven things you must know about a HUD reverse mortgage, or HECM.
1) Qualification is very simple. FHA requires that you be a homeowner of 62 years or older, own your home outright, or have a small lien against the home, and you must live in the home. If you meet these requirements and have never been in default on a government loan you can qualify. Much easier than your traditional loans!
2) To be eligible for the HUD reverse mortgage or HECM, your home must be a single family home or a 1-4 unit home with one of those units occupied by the borrower. Some HUD approved condos and manufactured homes that meet FHA requirements are also eligible.
3) The biggest myth about reverse mortgage loans is the lender can take your home. This is simply not true. As long as one of the borrowers lives in the home and keeps the taxes and insurance current, you do not need to repay the loan. You can never owe more than the value of your home even if its worth less than you owe.
4) Another popular myth is not having an estate to leave to your heirs. When you sell the home or the last borrower passes away, you or your estate will repay the reverse mortgage loan to the lender. Any remaining equity in your home belongs to your heirs.
5) How much money you can pull out of the equity in your home depends on three things; the borrowers age, the current interest rate and appraised value of your home. Please note the value used is the lesser of your home value or FHA mortgage limit in your area.
6) You can still apply even if you didn't buy your present home with FHA mortgage insurance. The new reverse mortgage loan will be FHA insured.
7) The HECM loan has five payment options: tenure, term, line of credit, modified tenure and modified term. Tenure pays equal monthly payments for the live of the borrowers. Term pays equal monthly payments for a fixed period of months selected. Line of credit provides you with an account you can withdrawal your choice of funds at any time. Modified tenure and term are a combination of line of credit and a tenure and term, respectively.