If you live in Los Angeles, and are 62 years of age or older, chances are you have looked for a reverse mortgage in Los Angeles. Created in 1961 to help aging homeowners stay in their home, reverse mortgages differ from tradition mortgages in that you get paid, instead of the other way around. Yes, you read that right. If you are approved for a reverse mortgage in Los Angeles, you could receive monthly payments for as long as you live in your home.
It’s actually quite simple. If you owe less on your home than it is worth, or if you own your home free and clear, that means you have equity just sitting there doing nothing. What a reverse mortgage does is takes that equity and pays it out to the owner until they vacate the property, either by selling the home or passing away. This means that you can have the freedom to do whatever you need; whether it be pay off your debts, pay for healthcare, or take that trip you’ve always been planning. Before settling on a reverse mortgage in LA, you should be informed on the ins and outs.
What are the requirements for a reverse mortgage in Los Angeles?
Los Angeles Reverse Mortgage Top Factors
Not every homeowner has access to a reverse mortgage. There are certain requirements that are needed in order to qualify:
The owners of the home must be 62 years old or older.
If there is a current lien on the home, meaning if you currently have a traditional mortgage, the money received from the reverse mortgage must be used to pay it off, causing the lending company for the reverse mortgage in LA to be the primary lien on the deed.
You must live in the home in which you are applying for the reverse mortgage. It cannot be a vacation or rental property.
The home owner is still responsible for all applicable fees, such as insurance and taxes.
You still own the home, which means you still must make all needed repairs and upkeep as long as you live there.
What types of reverse mortgages in LA are available?
There are basically two different types of reverse mortgages available. You will find the one ir more popular than the other. The different types are as follow:
Home Equity Conversion Mortgage
Simply put, the Home Equity Conversion Mortgage, also known as HECM, is issued by a lending company but is federally insured through the FHA (Federal Housing Authority). Being federally insured means that it protects you, the home owner, in case the lender wasn’t able to make to payment of the home value at the time of buyback was less than what you owed. This makes them the most common type of reverse mortgages in Los Angeles.
However, HECMs do have special regulations that must be followed that are not required with the other type. For instance, the home owner will be required to have a personal counseling session prior to proceeding with the reverse mortgage.
Proprietary Reverse Mortgage
Proprietary Reverse mortgages are not very popular due to the instability in the housing market. However, as market values stabilize, we will see these becoming more popular. One point that makes Proprietary Reverse Mortgages less popular is the fact that they are insure by the lending company instead of a third-party insurer. Therefore, they are not subject to the same rules as HECMs.
Also, and perhaps the greatest difference between the two, is that this type of reverse mortgages is usually only offered to homes valuing more than $750,000. Let’s face it, if you have a home of that value, you probably don’t need a reverse mortgage.
What is used to determine If I qualify for a Reverse Mortgage in Los Angeles?
You want to insure that you have researched every aspect of the reverse mortgage before deciding. Each lending company is different as to what they require, but there are a few generalities you can be sure to see from each:
Property Valuation-perhaps the greatest deciding factor on if you qualify for a reverse mortgage would be the value of your home. The lender will not only look at its current value but will estimate what the value will be at around the time you vacate the property.
Age-Your age is the main requirement to qualify. Every person listed on the deed must be 62 years old or high. There are no exceptions to this.
Income status– your lending company will determine if you are able to pay the necessary taxes and fees while you are still in the home. TO do so, they will require bank statements and tax returns, as well as prove of income.
How much can I expect to get?
There isn’t really a set algorithm that is common amongst lenders. Lenders will usually allow you to get the full value of your home. Keep in mind, though, the older you are, the more you will be likely to get.
When will the money be available from my reverse mortgage in LA?
There are several ways you can chose to receive the payout from your reverse mortgage. Some lenders may offer variations of the options, but they should be similar to what is found below:
Term Payments-Just as it sounds, this option allows the borrower to receive money monthly in the form of a payment from the lender. Similar to paying your monthly mortgage, except this option pays you. However, this type is usually only for a short period of time. For example, if you are 67 and want to wait to draw social security until 72, this option would allow you to supplement those five years.
Line of Credit– Similar to receiving a line of credit loan from your bank, this option allows you to withdraw money only when you need it. This is a good option of you are wanting to make home repairs, or same for unexpected health expenses. Usually, all you need to do to receive payment is to send a written request in to the lender.
Tenure payments– This option differs from term payments in that this option allows you to receive monthly payments for as long as you live in the house. With this option, the money only stops if you die, or leave the property, even if the loan balance exceeds the value of the property.
Be sure to work with your lender to decide which option is best for you. Also, you should be able to chance these options by mixing a matching several together to fit your needs. After all, it’s going to be your money; you should get it when you want it.
Keep in mind, however, that for the first 12 months, you will be limited to how much you can withdraw. Usually, the limit is 60%. There are, however, exceptions. Such as, if you owe more on your home than the 60% allows for, the lender can adjust the percent, giving you enough to pay your current mortgage off.
After the 12 months is over, you can take out however much you want. This will all be discussed when setting up the reverse mortgage in LA.
How much will it cost me?
The beauty of getting a reverse mortgage in Los Angeles is that there is usually little, if any, cost to the home owner. This is accomplished by the lending companies taking the fees out of the loan balance.
When it comes to insurance and interest, this is totally up to the lender. If your loan is insured through FHA, the fee is usually 1.25% of the loan balance, paid each year. This is the party where most people get turned off from reverse mortgages. Think of it this way; a tradition mortgage is similar to you letting the air out of a balloon, the more air you let out the smaller the balloon gets.
A reverse mortgage is the opposite. It’s like blowing a balloon up and watching it get bigger. As you receive payments from the loan, the balance gets increasingly higher. Don’t let that worry you, however. The beauty of being insured is that If the balance of the loan exceeds the value of the home, the FHA will absorb the rest. SO, don’t let that turn you away from getting a reverse mortgage in LA.
Just as researched when you were buying your home, so you should when searching for a reverse lending company. If you are in a situation where you need funds immediately, it may not be wise to jump into a reverse mortgage in fear of having regrets later down the road. However, if you need it to be able to stay in your home, don’t hesitate. After all, that’s why they were created.
When determining if a reverse mortgage in LA is right for you, be sure to involve your children, and any other family members who might benefit from it. They may have questions and doubts; let them express their concerns. In the end, they will be the ones to deal with it.
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