Otherwise known as a home equity conversion mortgage, or HECM, a reverse mortgage is a mortgage for seniors aged 62 and older insured by the Federal Housing Administration. The program enables seniors to convert the equity in their home for cash.
Would you benefit from a reverse mortgage? At Community Mortgage, we are a team of San Diego reverse mortgage specialists who believe in the role of real estate to help build our clients’ financial well-being. We help our customers select the best financial solutions for their unique situation and needs and help them understand their options.
How Can a Reverse Mortgage Help You?
If you are a senior aged 62 or older, you have the opportunity of accessing your home’s valuable equity through a reverse mortgage without having to sell your home. While these mortgages are aimed specifically at homeowners who own their homes outright, they can also be available to those who have a small balance on their existing mortgage and equity in their home.
A reverse mortgage allows eligible homeowners to convert their equity either into cash or an equity line of credit. Reverse mortgages offer seniors financial security by
- Not requiring monthly mortgage payments
- Offering cash in hand
- Offering the ability to stay in their home and maintain independence
- Offering tax-free funds from their home’s equity
- Offering a retirement that is worry-free.
What is a Reverse Mortgage?
A San Diego reverse mortgage is a mortgage vehicle specifically designed for senior homeowners that utilizes their home’s equity as collateral. The amount that the homeowner can take will be determined by several factors:
- The age of the homeowner
- The current interest rate
- The appraised value of the home
- The area’s specific lending limits
These funds are available in different forms
- They can be taken as cash at closing as a lump sum.
- They can be disbursed in equal monthly installments for the length of time that the homeowner lives in the home.
- They can be disbursed in equal monthly installments for a fixed number of years
- They can be drawn upon as a line of credit.
- Any combination of the above.
How Does a Reverse Mortgage Get Paid Off?
The loan generally does not have to be repaid until the last surviving homeowner permanently moves out of the home or passes away. When that happens, the estate will have a specific amount of time to pay the balance of the mortgage or sell the home to pay the balance. The remaining equity is inherited by the estate. The estate is not liable should the home sell for less than the balance of the reverse mortgage.
Who is Eligible?
There are several criteria to be eligible for a reverse mortgage and it’s important to understand the nuances of these requirements.
- In order to be eligible for a reverse mortgage, the youngest person on the title should be 62 years of age or older.
- Either the home must be clear of all mortgages or liens and encumbrances or proceeds from the reverse mortgage must pay these off at the time of closing.
- The home must be the primary residence of the homeowners
- The homeowner must keep current on all property taxes, homeowner’s insurance, homeowner’s association fees or any other financial obligations
- The property must be maintained and kept in good condition.
- The home must be a single-family home, a multi-unit property up to four units, a manufactured home built after June 1976, or condominium or a townhome.
You Still Own Your Home
Under the terms of a reverse mortgage in San Diego, the homeowner maintains legal title to the property. This is true even if the loan balance becomes greater than the value of the home. As long as one of the homeowners continues to live in the home as their primary residence and continues to maintain the financial responsibilities of that home, the balance does not become due.
Options After You Die or Leave Your Home
In the event that the homeowner no longer lives in the home as a primary residence or the homeowner passes away, the estate can either choose to repay the mortgage or place the home for sale in order to satisfy the loan. If the equity in the home is higher than the balance of the San Diego first mortgage, the remaining equity remains with the estate.
If the sale of the home does not pay off the balance of the reverse mortgage, the lender will need to request reimbursement from the FHA. This cannot affect any other assets of the estate.
What Are the Benefits of a Reverse Mortgage in San Diego?
- Access to Cash — For many people today, the reality is that they are financially unprepared for their retirement. For a homeowner who is looking to augment those retirement savings or deal with immediate cash-flow problems, a reverse mortgage can be a huge help. With this extra cash, a homeowner can enjoy their retirement.
- Eliminates Any Existing Mortgage Payment — more than half of all reverse mortgage borrowers use the proceeds of their reverse mortgage to pay off an existing mortgage, enabling them to reallocate money to meet their current needs.
- Extends the Life of Other Retirement Benefits or Savings — For those whose main source of income is Social Security, a reverse mortgage will enable a borrower to hold off collecting benefits for as long as possible, enabling them to get larger benefits when they do take them. A reverse mortgage can help retirees from tapping into their other sources of income as long as possible.
- Offers a Good Understanding of Your Options — Borrowers are required to undergo counseling with an HECM counselor who will go over all the options and features of a San Diego first mortgage. Because the HECM counselor must follow strict HUD protocol, it enables the borrower to completely understand the options as well as alternatives to a reverse mortgage.
Where Can I Find a Reverse Mortgage Near Me?
If you think you may benefit from a reverse mortgage, call the San Diego reverse mortgage team at Community Mortgage for a consultation at (619) 692-3630. We would be glad to answer any questions you may have.