Reverse Mortgages in
Laguna Niguel, California
Are you a retiree who owns a home in Laguna Niguel? If so, you may have already heard about the benefits of a reverse mortgage, perhaps from AARP or someone else. But did you know that there two different types of reverse mortgages available to you in your area? Homeowners like you can receive either a standard reverse mortgage or a jumbo reverse mortgage, depending on the value of your home. Learn about the differences between these two types of loans to see if one of them is right for you.
Home Equity Conversion Mortgage
A Home Equity Conversion Mortgage (HECM), known commonly as a reverse mortgage, turns the equity on your home into cash that you can use for any purpose. As opposed to a traditional forward mortgage, you make no monthly interest payments on a reverse mortgage. Interest still accrues, but it isn’t due until the end of the loan’s life.
A HECM reverse mortgage is insured by HUD through the Federal Housing Administration (FHA). The FHA requires a mortgage insurance premium (MIP) at the closing of the loan, as well as annually throughout the loan’s life. These premiums protect reverse mortgage lenders from losing funds in case of a default, much like insurance on a forward mortgage. MIPs also protect you from having to pay back more than the home is worth in case the home loses value. This is called a Non-Resource loan when you’re protected from paying back more than the home may be worth at the end of the loan term. Jumbo Reverse Mortgages are also Non Recourse loans, without the upfront or ongoing MIP.
You have several options to receive payment on a standard HECM reverse mortgage. You can choose either a lump sum, a line of credit, or a monthly annuity to receive the proceeds of your reverse mortgage. You can also mix and match two or even all three of these payment options. A fourth payment method, a reverse mortgage for purchase, uses the loan to partially finance the purchase of a new home.
Jumbo Reverse Mortgage
A jumbo reverse mortgage is similar in many ways to a standard reverse mortgage. There are, however, several distinctions between the two that could make a big difference in your loan. The primary difference between these loans is that a jumbo reverse mortgage is not insured by the FHA. This means that in all cases you are not required to pay any MIPs during the life of the loan. Jumbo’s offer the same protections as far as Non Reccourse loans and in that respect, similar to the HECM.
Jumbos are designed for borrowers who want a larger loan amount than is available with a standard FHA-insured loan. This is because the FHA places an upper limit of $679,650 on the loans they insure. With a jumbo reverse mortgage, you are able to borrow more than that, depending on the value of your home. Typically, jumbo reverse mortgages are ideal for owners of homes worth significantly more than the FHA lending limit, around $1.2 million and up.
As with most big financial decisions, you should be familiar with reverse mortgage costs before you dive in head first. A reverse mortgage calculator can help estimate rates. Once you’re sure you’re ready for reverse mortgage services in Laguna Niguel, apply today and get started on your loan.