How Do Reverse Mortgages Work in California

A reverse mortgage works by allowing homeowners 62 and older to borrow money from their home.  As a borrower, you can choose to raise funds in a lump sum, line of credit or through structured monthly payments.  So here is a short summary of how do reverse mortgages work in California.

How does it work?

• Get access to part of the equity in your home
• The percentage is based on the age of the youngest borrower
• Do not make monthly mortgage payments
• The funds are tax-free and can be used for almost anything
• A loan is paid when you die or when you sell your house
• Any remaining capital is yours

What is a reverse mortgage?

What is a reverse mortgage? A reverse mortgage is a high-end homeowner loan that allows borrowers to access part of the equity in the home and use it as collateral. Generally, the loan does not have to be repaid until the last borrower does not occupy the house as their primary residence. At that time, the estate has approximately 6 months to pay the balance of the reverse mortgage or sell a house for the balance. The estate inherits all the remaining estate. The estate is not personally liable if the house is sold for less than the balance of the reverse mortgage.

Who is eligible?

To be eligible for a reverse mortgage, the borrower must be at least 62 years old. Borrowers must own their home or have a minimum mortgage balance that can be paid when they finally move out of their home and close their ending balance. Many older people use this to supplement their social security or pension checks monthly if their current income is insufficient.

What happens if I change my mind?

People always change their minds in the first few days after making a big decision. This is a type of buyer’s regret, but federal law really protects it. This is 3 days and you have the right to cancel the transaction. The lender must explain this while it is closed, but if they don’t, it is important to ask them about it. It is important to call the names of people and places along with emails. This process can take a day or two if you are not prepared, so allow the lender to facilitate this by attaching these items before closing.

As many can see, California law is applied to protect and inform the borrower. Reverse mortgages are a relatively new type of loan, so lawmakers are working to make the laws fair to everyone involved. The proactive approach taken by many California politicians to reverse mortgages has made California one of the leading pioneers of reverse mortgage law.

California reverse mortgage rules

• Mortgage reversal requirements

The California Reverse Mortgage Elder Protection Act of 2009 states.  That a reverse mortgage may have a fixed or adjustable interest rate. The lender may charge fees and expenses when the loan is requested.  Periodically during the life of the loan or when it is due. If the borrower receives his money in periodic payments.  The lender cannot reduce the payments based on changes in the interest rate.  A lender that does not make the promised payments can increase the amount of the default plus interest. Lenders cannot penalize borrowers for paying the loan early.

• Counseling

Under California law, lenders must provide prospective borrowers with a list of 10 federally approved nonprofit consulting agencies to inquire about the risks and costs of a reverse mortgage; Advisors cannot receive direct or indirect compensation from the lender or from any other person involved in the origin or maintenance of the mortgage. The lender must provide the applicant with a checklist of topics for discussion, for example, if a medical or family emergency forces the applicant to leave their home earlier than expected, the loan will be due immediately.

Before you go, I hope this article summary of how do reverse mortgages work in California is helpful for you. If you need more help speak to a mortgage specialist before you decide on your next steps.