About Reverse Mortgages

For Seniors - Section 255 - Home Equity Conversion Mortgages (HECM)

- About the HECM Program - How the HECM Program Works - HECM Public Service Announcement

About the HECM Program:

The HECM FHA insured reverse mortgage can be used by senior homeowners age 62 and older to convert the equity in their home into monthly streams of income and/or a line of credit to be repaid when they no longer occupy the home. The loan, commonly known as HECM, is funded by a lending institution such as a mortgage lender, bank, credit union or savings and loan association. Borrower Requirements:

- Age 62 years of age or older - Own your property - Occupy your property as primary residence - Participation in a consumer information session given by an approved HECM counselor Mortgage Amount Based On:

- Age of the youngest borrower - Current interest rate - Lesser of appraised value or the FHA insurance limit Financial Requirements:

- No income or credit qualifications are required of the borrower - No repayment as long as the property is the primary residence - Closing costs may be financed in the mortgage Property Requirements:

- 1 family home or 1-4 unit home with one unit occupied by the borrower - Condominiums or Planned Unit Developments (PUD) must be HUD-FHA approved - Mobile Homes that meet HUD guidelines - Meets minimum property standards (borrower may fund repairs in the mortgage) How the Home Equity Conversion Mortgage Program Works: Homeowners 62 and older who have paid off their mortgages or have only small mortgage balances remaining, and are currently living in the home are eligible to participate in HUD's reverse mortgage program. The program allows homeowners to borrow against the equity in their homes. Homeowners can select from five payment plans:

* Tenure - equal monthly payments as long as at least one borrower lives and continues to occupy the property as a principal residence. * Term - equal monthly payments for a fixed period of months selected. * Line of Credit - unscheduled payments or in installments, at times and in amount of borrower's choosing until the line of credit is exhausted. * Modified Tenure - combination of line of credit with monthly payments for as long as the borrower remains in the home. * Modified Term - combination of line of credit with monthly payments for a fixed period of months selected by the borrower.

Homeowners whose circumstances change can restructure their payment options for a nominal fee of $20.

Unlike ordinary home equity loans, a HUD reverse mortgage does not require repayment as long as the home is the borrower's principal residence. Lenders recover their principal, plus interest, when the home is sold. The remaining value of the home goes to the homeowner or to his or her survivors. You can never owe more than your home's value.

If the sales proceeds are insufficient to pay the amount owed, HUD will pay the lender the amount of the shortfall. HUD's Federal Housing Administration (FHA) collects an insurance premium from all borrowers to provide this coverage.

The amount a homeowner can borrow depends on their age, the current interest rate, other loan fees and the appraised value of their home or FHA 's mortgage limits for their area, whichever is less. Generally, the more valuable your home is, the older you are, the lower the interest, the more you can borrow.

For example, based on a loan with an interest rates of approximately 9 percent, and a home qualifying for $100,000, a 65-year-old could borrow up to 22 percent of the home's value; a 75-year-old could borrow up to 41 percent of the home's value; and, an 85-year-old could borrow up to 58 percent of the home's value. The percentages do not include closing costs because these charges can vary.

There are no asset or income limitations on borrowers receiving HUD's reverse mortgages.

There are also no limits on the value of homes qualifying for a HUD reverse mortgage. The value of the home will be determined by an independent appraisal. However, the amount that may be borrowed is capped by the maximum FHA mortgage limit for the area, which varies from $172,632 to $312,895. For Alaska, Guam, Hawaii and the Virgin Islands, the FHA mortgage limits may be adjusted up to 150 percent of the ceiling depending on the area. The FHA limits usually increase each year. As a result, owners of higher-priced homes can't borrow any more than owners of homes valued at the FHA limit.

HUD's reverse mortgage program collects funds from insurance premiums charged to borrowers. Senior citizens are charged 2 percent of the home's value as an up-front payment plus a .5% annual premium, which is paid out on a monthly basis for the life of the loan. These amounts are usually paid by the lender and charged to the borrower's principal balance.

A homeowner must receive consumer education and counseling by a HUD-FHA approved HECM counselor. You can also use this handy Reverse Mortgage Calculator to help you see if you qualify.

 

 

 

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Gulf Shores and Orange Beach Area Info

Climate
The Gulf Coast Area has a mild climate with an average annual temperature of 67.4 degrees. The average temperature in January is 51.4 degrees. The average temperature in July is 81.8 degrees. The average annual precipitation is 67 inches, and the growing season is 292 days.

Education
Education is a fundamental block in building a bright future. The Gulf Coast Area opened a brand new high school during 1999 in Gulf Shores (ph. 251.968.4747). The area has two elementary schools; they are Gulf Shores Elementary (ph. 251.968.7375) and Orange Beach Elementary (ph. 251.981.5662). Gulf Shores Middle School (ph. 251.968.8719) offers an excellent curriculum in preparation for high school. All public schools are part of the Baldwin County school system. If you are interested in private education, you also have the option of Bayside Academy (ph. 251.955.5211), which includes age 3yrs – Grade 4.

Healthcare
The nearest hospital is South Baldwin Regional Medical Center (ph. 800.580.3627) located in Foley. South Baldwin Medical Center offers 24-hour emergency services (ph. 251.952.3400). Numerous medical professionals practice in the area providing both family practice and specialized care.

Airports
Corporate and Private air service is available in Gulf Shores from the Jack Edwards Municipal Airport, with a full Instrument Landing System and the longest paved runway being 7000 feet. The closest commercial air service is available in Pensacola, roughly 30 miles away, at the Pensacola Regional Airport (ph. 850.435.1746). Major carriers serving the airport are Continental, US Airways, Delta, Northwest, and American. Other commercial airports are located in Mobile (ph. 251.633.0313) and Gulf Port, Mississippi (ph. 228.863.5951).

Shopping
The area offers many shops ranging from casual apparel and beachwear to upscale fashion and specialty boutiques. If you are a bargain hunter, you can find 120 factory outlet stores in Foley.

Parks and Recreation
The nearest state park is the Gulf State Park (ph. 251.948.7275). The 6,000-acre park area offers campsites, picnic areas, 18-hole golf course, 825 foot fishing pier, 144 room hotel and convention center. Other parks in the area include Bon Secour Wildlife Refuge (ph. 251.540.7720), Meyer Park (ph. 251.968.4420), Johnnie Sims Park and Kids Park (ph. 251.968.4420), and Wade Ward Nature Park (ph. 251.968.4420).

State/Local Income Tax
For detailed information about Alabama income tax, contact the Alabama Department of Revenue, Individual and Corporate Tax Division (ph. 251.242.1000). In most instances, local governments in Alabama do not levy city, town, or county income taxes.

Property Taxes
Property (Ad Valorem) taxes are taxes on real business and/or personal property. “Ad Valorem” means “according to value”. For details, call the Revenue Commissioner’s office (ph. 251.943.5061, ext. 2840).