Many people choose to live in Arizona because of our great weather. Ok — let me re-phrase that — many people choose to live in Arizona between 6 and 9 months a year because of our great weather.
Some of those lucky few who migrate north for our super-hot summer months are getting more and more interested in a mortgage product called a Reverse Mortgage.
Did you know that FHA insures Reverse Mortgages?
The program is called The Home Equity Conversion Mortgage (HECM).
This program has become more and more popular due to the increase in home prices (equity available) and the aging demographics of America.
Eligibility & Repayment
The Home Equity Conversion Mortgage is the only reverse mortgage insured by the federal government. HECM loans are insured by the Federal Housing Administration (FHA), which is part of the U.S. Department of Housing and Urban Development (HUD).
The FHA tells HECM lenders how much they can lend you, based on your age and your home’s value. The HECM program limits your loan costs, and the FHA guarantees that lenders will meet their obligations. Lenders can always give you the maximum cash available to you.
HECM loans are available in all 50 states, the District of Columbia, and Puerto Rico. To be eligible for a HECM loan:
- You, and any other current owners of your home, must be aged 62 or over, and live in your home as a principal residence
- Your home must be a single-family residence in a 1- to 4-unit dwelling, a condominium, or part of a planned unit development (PUD). Some manufactured housing is eligible, but cooperatives and most mobile homes are not.
- Your home must meet HUD’s minimum property standards, but you can use the HECM to pay for repairs that may be required.
- You must discuss the program with a counselor from a HUD-approved counseling agency.
Questions about Repaying a Reverse Mortgage and in particular the HECM?
As with most reverse mortgages, you must repay a HECM loan in full when the last surviving borrower dies or sells the home. It also may become due if one of the below happens:
- You allow the property to deteriorate, except for reasonable wear and tear, and you fail to correct the problem.
- All borrowers permanently move to a new principal residence.
- The last surviving borrower fails to live in the home for 12 months in a row because of physical or mental illness.
- You fail to pay property taxes or hazard insurance, or violate any other borrower obligation.
FHA HECMs Versus Other Reverse Mortgages – What’s better?
HECM loans generally provide the largest loan advances of any reverse mortgage. HECMs also give you the most choices in how the loan is paid to you, and you can use the money for any purpose. For example, you can take the money in a lump sum, you can take it and put it on a credit card (which pays you interest) and draw on the money anytime you would like or you can take the money in monthly installments.
As with other FHA insured programs, these HECM loans are designed to help a segment of the population (in this case, older Americans who want to convert years of their hard-earned equity into cash so they can live comfortably in retirement) and are an excellent financing choice for those people in the right situation.
Are you interested in learning more about Reverse Mortgages? Let us know!