Q: What Is A Home Equity Conversion Mortgage (HECM)?
A: The home
equity conversion mortgage or HECM is an FHA insured reverse mortgage regulated
by HUD. It allows homeowner to convert a portion of the equity in his or her
home into cash. Unlike a traditional home equity loan, the borrower is not
required to make repayment as long as he or she occupies his or her home as the
principal residence.
Q: What Are The Advantages Of A HECM Reverse Mortgage?
A: There are
many advantages of a HECM reverse mortgage.
No credit qualification: Your credit score does not affect your eligibility
for an HECM loan.
No income restrictions: It does not have any minimum income requirement.
Free you from existing loans: It pays off your existing loans by using the proceeds
from the HECM loan.
No more monthly payments: You do not have to make monthly payments to repay the
loan as long live at your home.
Monthly cash flow: You can receive a guaranteed monthly cash flow for your entire
lifetime (available on certain programs).
Line of credit:
You may also have a credit line established and request money at any time for
any purpose (available on certain programs).
Fixed rate:
Available with a full cash lump sum at closing.
USE THE MONEY ANY WAY
YOU WISH.
Q: What Is The Minimum Age Requirement?
A: All the
borrowers on title must be at least 62 years of age.
Q: What Is The Role Of The Counseling Agency? Is It
Required?
A: HUD is
monitoring your interest carefully. For that reason, HUD requires all HECM
borrowers to receive counseling from a HUD-approved counseling agency.
Q: What Types Of Homes Are Eligible For A HECM Loan?
A: Your home
can be a single-family residence, a 1 to 4 unit building with one unit occupied
by the borrower, a manufactured home (must have an FHA-approved permanent
foundation installed), a unit in an FHA- approved condominium, or a unit in a
PUD project.
Q: Do I Have To Live In My Home?
A: Yes.
However, if you need to be hospitalized and moved into a health facility you
may be absent from your home as long as you provide the appropriate
notification as required by HUD and FNMA.
Q: Do I Still Have To Continue Making Payments On My Existing
Home Loan?
A: No, you
will never have to make any monthly payment on your home since American
financial network, Incorporated, will pay off your existing home loan using the
new HECM loan proceeds.
Q: Must The Home Be Debt Free To Qualify For An HECM Loan?
A: No, a
home that has an existing lien will qualify for an HECM loan as long as the
proceeds of the loan are large enough to pay off any existing mortgage.
Q: Why Can’t I Just Get A Home Equity Loan?
A: With a
traditional home equity loan, you must qualify for the loan and you are
required to make a monthly mortgage payment. With a HECM, there is no income or
credit qualification required and you do not have to make any mortgage
payments. This loan is primarily based on your age and the value of your home.
Q: How Much Money Is Available To Me?
A: The
lender will calculate the amount available based on your age, the interest
rate, the value of your home, the county your home is located in, total closing
costs, amount of any lien against your home and other factors.
Q: In Whose Name Does The Title Remain?
A: Title of
your home always remains in your name, not in the name of the lender. The
lender has no interest in your home except for the amount you owe the lender.
Q: What If I Am Deemed To Be Mentally Incapacitated?
A: Your
spouse, or if not available, your appointed Guardian will continue with the
management of the loan.
Q: Can The Title Be Held In The Name Of My Trust
Instead Of My Name?
A: Yes, if
it is revocable and meets other HUD guidelines.
Q: How Much Does It Cost To Get This Loan?
A: You
practically have the same fees as any other loan, including origination,
appraisal, title, escrow, and the upfront mortgage insurance premium to HUD.
All fees are regulated by HUD.
Q: Do I Have To Pay These Fees At Closing?
A: Yes.
However, most of these fees can be financed into the loan, which means that you
do not have to come up with cash out of your pocket.
Q: Do I Need An Appraisal?
A: Yes, the
value of your home is one of the most critical parameters in determining how
much borrowing power you have.
Q: What Is The Interest Rate On The HECM Loan And How
Is It Determined?
A: The
interest rate is either fixed or an adjustable rate. The adjustable is offered
as per Fannie Mae under HUD's guidelines. Is equal to the one year United
States treasury constant maturity rate plus a margin.
Q: Who Pays The Taxes And Insurance?
A: You do.
However, you may authorize us to do so if there are enough funds in the line of
credit.
Q: Is The Money From The HECM Loan Taxable?
A: No, it is
tax-free. For further information, please contact your tax attorney.
Q: Will Leave From The HECM Loan Affect My Social
Security And Medicare Benefits?
A: No, it
does not affect Social Security and Medicare. For more information, please
contact these agencies for your specific circumstances.
Q: How Do I Receive My Payments?
A: There are
six options you may choose:
1. Lump sum cash payment - available with a fixed rate.
2. Tenure - equal monthly payments for as long as at least one
borrower continues to occupy your
home as the principal residence.
3. Term - equal monthly payments for a fixed number of months selected
by you.
4. Line of credit - unscheduled payment at times and amounts chosen by
you until the line of credit is
exhausted.
5. Modified Tenure - combination a line of credit and monthly payments
for as long as at least one
borrower remains in your home.
6. Modified term - combination of a line of credit and monthly
payments for a fixed number of months
selected by you.
Q: Can I use the payment from the lender to pay for
hazard insurance?
A: Definitely!
You will need to notify us as required by HUD/FNMA. The lender will pay the
insurance premium directly out of the funds in the credit line.
Q: What if my financial needs change?
A: If you
have money available in your credit line, you could request it at any time for
medical or personal needs. You can also cut back or increase the monthly
payment amount. There will be a minimal handling charge of $20 as regulated by
HUD.
Q: Do I have to pay anything during the course of the
loan?
A: No.
However, you are responsible for paying your real estate tax, hazard insurance
and flood insurance if applicable. You also need to maintain the condition of
your home.
Q: Is there any prepayment penalty?
A: No. You
may make a full or partial payment at any time without any penalty.
Q: What if the loan balance becomes greater than the
value of my home?
A: No matter
how large the loan balance becomes, you have the right to continue to live in
the house. The lender cannot take over your home as long as it is your
principal residence. Besides, you will never owe the lender more than the value
of your home. HUD will pay the shortage for you, if there is any.
Q: What happens if I died? Will the lender be taking
my house?
A: No. After
you pass away, your heirs may pay the loan balance in full with cash or by
refinancing the debt and they can keep your home.
Q: What happens if I move out of my home?
A: The HECM
loan becomes due and payable as soon as your home is no longer your principal
residence.
Q: Are there other situations in which my loan will
become due and payable?
A: Yes. Two
of the other situations in which the HECM loan may become due and payable are:
1. You failed to pay real
estate taxes or hazard insurance.
2. You failed to maintain
your home in acceptable condition.
Q: Is there a time limit for my heirs to liquidate my
home and pay off the lender after I die?
A: American Financial Network, Inc. will
provide your heirs with up to one year to sell the home or refinance or pay off
the loan as long as they are making a good-faith effort to do so.
Q: How much will be owed when the loan is due and
payable?
A: The total
loan balance will include all of the payments to you, the accrued interest,
accrued mortgage insurance premiums, servicing fee, and other costs such as
closing costs or repair fees financed as part of the loan balance. Note that
the repayment amount will never exceed the appraised value of your home when
you're loan becomes due.
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American Financial Network, Inc. is licensed by the California Department of Corporations
under the Finance Lender's Law License (638771) and holds A Corporation Real
Estate Broker’s License (01317581) under a Nationwide Mortgage Licensing System
(NMLS), unique identifier 237341. Refer to http://www.nmlsconsumer.org/EntityDetails.aspx/COMPANY/237341
to see where AFN is a licensed lender. In all states, the principal licensed
office of American Financial Network, Inc.
is 3110 Chino Ave. #290, Chino Hills, CA 91709. Phone: (909) 287-7001. The
content on this blog website is for informational purposes only. The content is
not meant for legal, tax or professional accounting advice. Please consult your
state benefits advisor if you receive public benefits, as these may be
affected, or consult a tax professional. All American Financial Network, Inc. programs are subject to change
without notice.
