Reverse Mortgage in
Just because you’ve retired, doesn’t mean you’re no longer interested in making money or having the same monthly income stream. With a reverse mortgage, you can enjoy your well-deserved retirement without giving up your income! But what are your options when it comes to a reverse mortgage in Anaheim? Know what to expect, the costs, and the benefits of a reverse mortgage, and start yours today!
Types of Reverse Mortgages
A home equity conversion mortgage, also called a HECM, is a type of reverse mortgage that ensures you will never have to repay more than the value of the property, even if the property value has dropped. Any equity left over can be given to heirs, and heirs can also purchase the property for 95% of the market value. A HECM is widely used by people who want to stay in their house and still use the equity in their home.
Reverse Mortgage for Purchase
A HECM for purchase is designed for people who would like to purchase a home and not have a mortgage payment (the taxes & Insurance payments would still continue). Whether it’s to move closer to children, a lateral move or downsize. Common uses for this type of mortgage include making up the difference between the value of the old house and the cost of the new or keeping funds from the sale of the old house liquid rather than tying them up in the new house.
Jumbo Reverse Mortgage
HECMs are FHA-insured and subject to the FHA’s upper lending limit of $679,650. Jumbo reverse mortgages are designed to make the benefits of a HECM available to people with high-value homes. They’re not insured by the FHA, so they’re not subject to the upper lending limit. They work particularly well for older lenders and homes above $1.2 million.
Reverse Mortgage Costs and Fees
There are many different costs associated with any type of mortgage. For a reverse mortgage calculator, see Trinity’s summary of costs and fees of a reverse mortgage. Most of these costs and fees are up-front, one-time fees, but there are ongoing fees.
- Loan origination fee – can vary and depends on the type of mortgage program you have, but this fee is capped at $6,000 so you would never pay more than that despite the value of your home.
- Appraisals – typically cost around $550, but can cost more for a special property type.
- Closing costs and third-party services – include title insurance, inspections, property taxes, etc. They can be paid upfront or financed.
- Up-front mortgage insurance premium – The upfront MIP rate is 2.0% of the appraised value.
- Monthly mortgage insurance premium – monthly charge of .50% on top of the up-front MIP. This was reduced from 1.25% to .50% on 1-1-2018.
- Interest – Interest types available are Fixed interest rates, annually adjustable and monthly adjustable rates.
Benefits of a Reverse Mortgage
A Credit Line is where the money making comes in. If you choose a Line of Credit then the line of credit grows by the rate of interest you are being charged on the loan balance plus the ongoing monthly mortgage insurance premium. For example, if the Initial interest rate is 4.277% and the ongoing MIP is .5% then the credit line grows by 4.777%. So if there is $100,000 in the credit line and after a year the available line of credit would grow to $104,277 after 12 months. It would actually be more than that because the compounding would be monthly and not annual, but I think you get the point.
The amount of money you release from your equity on your HECM depends on a few things. First, the age of the youngest borrower or eligible non-borrowing spouse. Second, the current interest rate. Lastly, the lesser of appraised value, or the HECM FHA mortgage limit of $679,650. If you purchased the home in the last 12 months, you must use the purchase price. Typically the older you are and the more your house is worth, the more money (equity) you can receive.
The lending limits for jumbo reverse mortgages are set by reverse mortgage lenders. As of June 2018, the lenders will cap the home values at $8.0 million. And the Loan to value range is approximately 24% to 50% depending on the age of the youngest borrower.
There are many ways you can receive your payments. For an adjustable interest rate mortgage, payments can be received as equal monthly payments, unscheduled payments when you choose, a lump sum, or a mixture of all three. For a fixed interest rate mortgage, payment is received as one payment at the mortgage closing for HECM’s. For Jumbos, you can either take a lump sum or put the excess in a credit line.
There are many benefits to a HECM reverse mortgage in Anaheim. Learn more about HECM reverse mortgages and apply for yours today!