Get the Basics to Understand Reverse Mortgages and How They Work in California
Are you over the age of 62? It’s likely that you have come across the term “Reverse Mortgage” (RM) at least once in the years leading up to that point. What exactly is it, and how can this mortgage program assist you in enjoying a stress-free, calm golden age?
The goal of this article is to give you, the senior consumer a glance into what advice will make your transaction a smooth and satisfying one. However, there are several traps and areas of worry that all RM transactions can be vulnerable to. Remember that Neighborhood Escrow is here to help with all escrow services.
But first, some basic information: what exactly is a “Reverse Mortgage”?
The Federal Housing Administration insures a certain type of loan known as a “Reverse Mortgage” for borrowers who are 62 years of age or older (FHA). A home equity conversion mortgage is another name for it (HECM, pronounced hekm). The following are the key details of this mortgage:
- The property must be the borrower’s primary residence and they must be 62 years old or older (s)
- There are no ongoing fees necessary
- It is necessary to pay the property taxes and insurance
- You can withdraw money in one single sum or in small amounts until you’ve used it all
- You can use the money draw for whatever you would like
After the 62-year-old Borrower(s) passes away or stops using this property as their primary residence, the loan must be repaid in full. Naturally, the actual Borrower and property requirements are a little more intricate, so at this point you should speak with a reputable RM loan officer.
However, there are a few pointers that I would want to provide with both the borrower and the loan officer as the escrow officer who will open and close an RM loan because it is in everyone’s best interests to make the transaction simpler.
Communication is essential
It’s crucial for borrowers, loan officers, and especially the escrow officer to communicate. Contract or terms changes? Status changes in your life? Ownership changes? Additional paperwork from the client might be required by your escrow officer, and the loan officer would need to redisclose or recalculate the loan amounts. Inform them in advance to prevent any delays.
Was a private loan obtained, for instance, immediately before the RM loan was approved? The private lender will need to be contacted for the necessary papers, and this loan will need to be repaid. Another scenario: Is the Borrower receiving medical attention? If the signing will take place somewhere other than your home—for example, a hospital—let your escrow officer know ahead of time.