Home Equity Conversion Mortgage (HECM) reverse mortgages
A Home Equity Conversion Mortgage (HECM) is a federally insured reverse mortgage. Ninety-five percent of all reverse mortgages are HECMs. The Federal Housing Administration (FHA) sets limits on how much a HECM reverse mortgage lender may lend you-based on your age, your home's value and location-and what your total loan costs will be. HECM loans give you a wide choice in how you may receive the cash from the reverse mortgage. HECM loans generally provide the larger loan advances than other reverse mortgages. An exception is Financial Freedom's Cash Account Plan reverse mortgage which may offer cash advance opportunities significantly higher than other reverse mortgage products.
Home Equity Conversion Mortgage (HECM) Frequently Asked Questions
Q. Since federally-insured HECM loans are regulated by the U.S. government, are all HECM loans the same?
A. Yes and no. All HECM lenders must follow HUD rules and many of the loan costs, including the interest rates, will be the same no matter which reverse mortgage lender you choose.
Q. What are the eligibility requirements for a HECM loan?
A. You, and any other current owners of your home, must be aged 62 or older. The home must be your primary residence. It may be either a single-family residence in a 1- to 4-unit dwelling, a condominium, or part of a planned unit development (PUD). Though some manufactured housing is eligible, most cooperatives and most mobile homes are not. The home must be at least one year old and meet HUD's minimum property standards*. Finally, you must agree to discuss the program with a counselor from a HUD-approved counseling agency.
Q. Does the location of our home also affect the size of a HECM loan?
A. Yes. The size of a HECM loan depends on the maximum lending limit, which varies by county and is adjusted annually. For 2005, the FHA loan limit varies from a low of $172,632 (for rural areas) to a high of $312,895 (for high-cost metropolitan areas
Q. Are there any advantages by taking my HECM loan as a line of credit?
A. Yes. That's because a HECM line of credit continues to grow over time, increasing the amount of cash available to you until you withdraw all of it. That is possible because the remaining balance in your line of credit grows by the same total rate that is charged on your loan balance.
Consider this example. Say you have a HECM line of credit of $150,000 and you withdraw $25,000. The remaining line of credit would be $125,000. If your next withdrawal is a year later you would have more than $125,000 available to you. Here's how it works to your advantage: if the total loan rate is, for instance, 6%, your available credit line would be 6% higher than it was a year earlier. Instead of having $125,000 available you would have $132,500 in your line of credit (6% of $125,000 = $7,500). In this example, you would have an extra $7,500 available to you in year two of your reverse mortgage. A nice added bonus.
Q. How are the interest rates computed for a HECM reverse mortgage?
A. The HECM rates are based on the variable T-Bill (U.S. Treasury bills) interest rate plus margin. It is adjusted either monthly or annually.
Q. Are HECM loans available throughout the U.S.?
A. HECM loans are available in all 50 states, the District of Columbia, and Puerto Rico. (HECM credit line options are available in all states except Texas.)
Fannie Mae Home Keeper® Reverse Mortgage
A Home Keeper® reverse mortgage is Fannie Mae's conventional market alternative to the Home Equity Conversion Mortgage (HECM). It is a government-sponsored enterprise program and works like a HECM loan in many ways. However, a Home Keeper® reverse mortgage addresses a few needs that are not met by HECM loans, such as individuals with higher property values, condominium owners, and seniors wishing to use a reverse mortgage to purchase a new home.
Fannie Mae Home Keeper® Reverse Mortgage: Frequently Asked Questions
Q. What types of homes are eligible for a Fannie Mae Home Keeper® reverse mortgage?
A. Home types eligible for Home Keeper reverse mortgages include single-family homes, condominiums, and units in qualified planned unit developments.
Q. How do Home Keeper reverse mortgage loan limits compare to those of HECM loans?
A. Home Keeper reverse mortgages can be larger than HECMs because Fannie Mae's maximum lending limit - $359,650 for 2005 - is larger than the highest locally applied FHA mortgage limit.
Q. In what ways may I receive money from a Home Keeper reverse mortgage?
A. You may choose to receive money from a Home Keeper reverse mortgage in the same way you may receive funds from a HECM loan: as fixed monthly payments for life (i.e., for as long as the borrower occupies the home as his/her principal residence; as a line of credit with no growth; or a combination of monthly payments and line of credit).
Q. How are the interest rates computed for a Home Keeper reverse mortgage?
A. The HECM rates are based on the variable CD (Certificate of Deposit) interest rate plus margin and is adjusted monthly.
The current (2005) lending limit with a Home Keeper® reverse mortgage is $359,650.
Financial Freedom Cash Account Plan
Financial Freedom's proprietary Cash Account Plan is a reverse mortgage-with a choice of three options-that has been designed specifically to meet the needs of senior homeowners with substantial home equity. No other reverse mortgage lender offers a jumbo loan product comparable to the Cash Account Plan and its three options.
Financial Freedom Cash Account Plan reverse mortgages have virtually no limit on home value or the amount of the loan. As a result, the amount of money available to the homeowner may be substantially greater with a Cash Account Plan reverse mortgage than with other options.
Currently there are three Cash Account Plan options: the Standard Option, the Zero Point Option, and the Simply Zero Option which eliminates up-front fees. With all Cash Account Plan reverse mortgage options, there is a lifetime interest rate cap of 6% over the initial annual percentage rate (six-month LIBOR [index] + 5% [margin]); this rate is reset semiannually. A servicing fee is automatically financed on the account each month; there is no such fee in Illinois and Maryland.
In addition, there is no equity or appreciation sharing and no maturity fee.
Available for all Cash Account Options, Equity Choice Feature allows the borrower to limit the loan obligation to a stated percentage of the full market value of the home resulting in the amount of the loan or line of credit being less than the amount for which the borrower otherwise qualifies. Borrowers may choose to protect a minimum of 10% and a maximum of 50% of their home equity. This permits greater flexibility assuring a percentage of equity remaining to benefit the borrower or heirs upon loan maturity.
Financial Freedom Cash Account Plan: Frequently Asked Questions
Q. What is the Cash Account Plan Standard Option?
A. The Cash Account Plan Standard Option reverse mortgage offers borrowers an open-ended revolving line of credit. The unused line of credit grows by 5% per year on the pledged value.
The origination fee on these reverse mortgages is a scaled percentage of the home's value up to a maximum of 2%.
The minimum draw at closing is $500.
Q. What is the Cash Account Plan Zero Point Option?
A. There is no origination fee on Zero Point Option reverse mortgages. As for closing costs, the actual third party costs may not exceed $3,500 (excluding state or local taxes, if any).
The Cash Account Plan Zero Point Option reverse mortgage requires borrowers to draw at least 75% of the maximum available at the time of closing. The minimum amount of any draw after closing is $500. The unused line of credit grows by 5% per year on the pledged value.
There is no prepayment penalty. A partial prepayment is not allowed on the minimum draw at closing for the first five years. A full prepayment, however, is permitted.
Q. What is the Cash Account Plan Simply Zero Option?
A. The Cash Account Plan's Simply Zero Option has no origination fee and no closing costs (excluding state or local taxes, if any).
The required draw at closing is 100% of the amount available.There is no prepayment penalty. A partial prepayment is not allowed on the minimum draw at closing for the first five years. A full prepayment, however, is permitted.
Q. What is the Equity Choice feature? How will it benefit me?
A. Equity Choice is a value-added feature that is available on all three Cash Account Plan options.
It allows the borrower to limit the loan obligation to a stated percentage of the full-market value of the home. This means the amount of the loan or the line of credit can be less than the amount for which borrower otherwise qualifies.
Equity Choice enables borrowers to protect a minimum of 10% and a maximum of 50% of their home equity. It also provides greater flexibility, assuring the borrower that a percentage of equity will remain, benefiting the borrower or heirs when the loan matures.
Q. What kinds of homes are eligible for the Cash Account Plan reverse mortgages?
A. The following home types are eligible for Cash Account Plan reverse mortgage:
•· Single-family detached homes,1 to 4 rental unit (one must be owner occupied)
•· Manufactured homes (must be built after June 1976)
•· Condominiums
•· Planned Unit Developments (PUDs)
;)
;)
