California Reverse Mortgages by your Sacramento Reverse Mortgage Provider

A Homeowner’s Guide To California Reverse Mortgages

What is an FHA reverse mortgage?
The FHA insured reverse mortgage was designed by the US Department of Housing and Urban Development (HUD) to give older homeowners a vehicle for converting the equity in their homes to cash. The reverse mortgage allows you to tap your home equity and receive your loan proceeds according to a payment plan that you select whether it’s a lump sum to pay unexpected bills or a stream of regular income to supplement your monthly income.

Who is eligible for a California reverse mortgage?
You and any co-owners, must be at least 62 years old and either own your home free and clear or have a relatively low remaining mortgage balance. Your home may be a single-family or 2 to 4 family unit dwelling. Units in condominiums, manufactured homes and homes on leased land may be eligible if they conform to FHA guidelines.

How much can I obtain?
The maximum amount you can obtain (your principal limit) is based on a HUD formula that includes these three factors: 1. the age of the youngest homeowner. 2. The maximum claim amount. 3. The expected average mortgage interest rate. The maximum claim amount is the total amount of equity you can obtain from your home it is the lesser of the appraised value of your house or the maximum loan amount allowed by the FHA for one family residences.

How are reverse mortgage proceeds paid to me?
With an FHA reverse mortgage, you receive your proceeds according to your choice from among five possible reverse mortgage plans: 1. Tenure monthly income for as long as you occupy the property. 2 A monthly income for a specified time. 3. A line of credit where you access your funds at any time you want. 4. A modified tenure plan combined with a line of credit. 5. A modified term plan combined with a line of credit.

Is a Sacramento reverse mortgage flexible?
The Sacramento reverse mortgage is unique in the amount of flexibility in the plan it offers borrowers. In addition to having several options to choose from, you may change plans at any time after you take out your reverse mortgage, and as many times as you wish. You may also receive a lump sum at closing to repair or improve your home, or for other needs. This flexibility allows you to reshape your plan as your circumstances change.

Am I protected in any way?
A significant feature of the FHA reverse mortgage is that it is insured under the government’s Federal housing administration insurance program. This program ensures that you will receive all proceeds due to you as long as you live in your home it also ensures that your lender will receive full repayment of your loan balance, even if it is greater than the value of your property. The FHA insurance premiums that you pay as a borrower create a reserve fund to cover any losses that occur. The FHA insurance on a reverse mortgage also protects homeowners and lenders against the risk that the loan balance might, at sometime, exceed the value of the home.
This means that as long as you occupy your property as your principal residence, you cannot be forced to sell or vacate your home even if the loan balance exceeds the value of your home or you have received all of your available proceeds. FHA insurance also protects you against the possibility of lender default. Should your lender fell to make payments to you as agreed in the loan, the FHA will continue making loan advances directly to you.

How is the balance determined?
Your reverse mortgage balance represents the total amount you owe in principal, interest and financed costs. Your reverse mortgage balance increases over time because it grows larger with each loan advance you receive, and because interest and other charges accrue each month on the total funds advanced to you.

What fees are charged?
Basic charges on a California reverse mortgage include four types of fees: an origination fee, initial and monthly mortgage insurance premiums and other closing costs. Some of these fees are payable at closing and some are added monthly to the loan balance.

Will an FHA reverse mortgage affect other benefits that I receive?
Reverse mortgage benefits that you receive will not affect your Social Security or Medicare eligibility because these programs are not based on need. If you receive supplemental security income, Medicaid or Medi-Cal benefits these may be affected by your reverse mortgage benefits. To determine whether reverse mortgage payments would affect your particular situation, you must consult your local offices for SSI, Medicaid, Medi-Cal and other programs from which you receive benefits, or a specialist in such benefits through your local area agency on aging or the nearest legal services office.

When do I repay the reverse mortgage?
Your reverse mortgage must be repaid when you sell or convey title to the property to another party, upon your death or the death of the last surviving homeowner, or when it’s no longer the principal residence of at least one borrower. You or your heirs may choose to refinance your home or sell it. There is no pre-payment penalty.

What if I need more cash than an FHA reverse mortgage can provide?
FHA reverse mortgages are just one of the reverse mortgage programs available. There are certain limitations with reverse mortgages, such as maximum loan amounts, that limit homeowners to very specific guidelines. We offer reverse mortgages with flexible benefits that extend well beyond the limits of a traditional reverse mortgage. You may qualify for larger advances, more cash up front and alternative rate programs, depending on your circumstances.

Are there restrictions on how I spend the money?
There are absolutely no restrictions on how you use the cash. Pay off credit card debt, travel, make home repairs, buy a new car, take care of your health care needs, pay for in-home help, you choose how to spend the money. Additionally, the money is tax free, and you don’t make a single payment for as long as you live in the home.

What if I change my mind?
Federal law provides you with a three-day right of rescission, that is, the option to cancel the contract without penalty within three business days from the day you sign the final loan documents. Your proceeds are not paid to you until after the end of this period.