A person who is 62 years of age or older can avail the reverse mortgage program. The program enables him to withdraw some of the equity in his home to aid his financial issues. It is commonly known as the Home Equity Conversion Program or the HECM.
What is actually reverse mortgage?
Reverse mortgage is a special type of loan that has been designed to convert a portion of equity in your home into cash. It is different than the traditional loan as there is no need to repay the HECM loan by the borrowers until they live at their principle place of residence or fail to meet the regulations. This loan can also be used to purchase a primary residence if the person can use the cash in hand to pay for the difference between the HECM proceeds and the sales price as well as closing costs of the property.
Does it suit you?
There are various factors that need to be considered while determining whether this program suits you or not. To help yourself gain an actual picture of your current financial conditions you can take the help of Hud reverse mortgage counseling sessions. The counselors will help you in identifying your actual financial condition, determine whether you fit the eligibility conditions or not and assist you on other alternatives to obtain equity conversion and repay your loan. These sessions are also helpful in determining as when the mortgage would become due and payable.
There are specific eligibility conditions that need to be met before you file your application. These conditions are as follows.
For the Borrower
- Must be 62 years of age or older.
- Should own the property or minimum amount of mortgage is left unpaid.
- Reside at that particular house as his primary place of residence.
Property based Criteria
- The property should follow all FHA standards.
- The residence should be approved by the HUD.
- A stringent verification is done to ascertain the real income, assets, monthly expenses and credit history of the applicant.
- The borrower should have paid all real estate taxes and other insurance premiums on time.
Payment Plan- You can choose among these payment plans as per your requirements.
- Tenure- Equal monthly installments are paid as long as at least one borrower lives and occupies his principal place of residence.
- Term- Here equal monthly installments are paid for a fixed number of months.
- Line Of Credit- In this payment plan unscheduled payments or installments are provided with an amount of your choice until the line of credit is completely exhausted.
- Modified Tenure- It is the combination of line of credit and scheduled monthly payment plan.
- Modified Term- It is the combination of line of credit as well as monthly payments for a fixed period of months.
The application process is not as simple as it looks out to be and hence you need to be careful before filing it up. Moreover this program has also attracted a lot of frauds and scams. To prevent yourself from such situations it is advisable to go for consolidated credit counseling services before you file your application.
The author is an expert on financial solutions. In this article he explains the reverse mortgage program and advice to go for consolidated credit counseling services before you file your application.