Reverse Mortgages

(also called Home Equity Conversion Mortgages)

FIDELITY BANCORP is one of the very few FHA-CERTIFIED mortgage companies who DO NOT charge HECM borrowers for: Loan origination fees, monthly service fees, or fees for the government insurance on the loan.

What is The HECM LOAN?

The HECM Loan is part of a national government-sponsored and designed loan program, for homeowners who are 62 years old or older who want to borrow up to $625,000 without ever having to repay any of the loan until the last surviving borrower either dies, sells the home, or moves out of the home for more than a year. Borrowers must continue to pay the home’s property taxes, insurance, and maintain the home in reasonably good condition.

The exact amount you can borrow depends on your age, value of your home, and the current interest rate, which is now near a 40 year low. The lower the interest rate, the more money you can receive. Generally, borrowers can borrow approximately 60% to 70% of the value of the home, through an HECM mortgage loan. This is just a loan, so you retain full title to your home and full ownership. You pay nothing out of pocket to receive the loan because the loan closing cost is paid from the loan money you receive.

Your Options for receiving your HECM loan money:

Regardless of what option you choose to receive your money, you never have to make a payment for as long as the last surviving borrower lives in your home, maintains it in reasonably good condition, pays the home’s required property taxes and insurance, and does not move out for more than a year. Here are your options:

Fixed Rate Cash Lump Sum: You accept the full loan amount as a lump sum, such as to pay off an existing mortgage and/or use most of the money soon for other purposes. Fixed rates currently give you thousands of dollars more than the adjustable rate options, although the adjustable credit line option, detailed next, has advantages too.

Adjustable Rate Credit Line: Unlike other Home Equity Credit Lines offered by banks and other lenders, the HECM Credit Line option fully protects you because it cannot be closed, frozen, or called for immediate full repayment while in use. The amount of money you can draw from your HECM credit line increases each month based on the amount of the portion you have not yet drawn. You can draw as little or as much as you want at any time for any purpose you want. Loan interest does not accrue on the unused portion of your credit line balance. That way, your loan balance does not continue to increase any more than it has been until you draw more money.

Tenure Payment Plan: This plan can stand-alone or be combined with the other features of the adjustable rate credit line option shown above. You receive structured monthly payments that you are guaranteed to receive for life, or for the number of years that you choose, and that will continue in that manner until you pay off the loan.

The HECM loan is a safe HUD/ FHA Government-Insured Non-Recourse loan, therefore you are protected.

The HECM has helped thousands of senior homeowners safely borrow money on their homes, without selling their homes, in order to help them better enjoy life and/or pay off debt etc., without having to make any monthly payments on the HECM loan. Part of the Non-Recourse insurance, guarantees that you and / or your heirs will never have to repay any portion of the loan balance that exceeds the amount your home sells for in a bona-fide arms-length sale. In fact, if someday you or heirs sell you home, you can even deduct from what you owe, the standard fee paid to the real estate company who may have listed and sold your home for you. Therefore, if at any time in the future you or heirs sell the home in that manner, you also are protected further because of being able to deduct the real estate sales commission from the amount of your loan balance.

Here are some examples: Your HECM loan balance has grown to $120,000 but you or your heirs sell the home for only $100,000 minus a 6% commission to a real estate company who may have listed your home = $94,000...that's all you would owe, $94,000...the rest is paid by Government insurance.

Next Example: Your loan balance has grown to $100,000 and you or your heirs sell the home for $200,000 less 6% real estate commission fee. Thus you receive $188,000 of which $100,000 pays off the loan balance. You can do what ever you want to with the remaining $88,000. You could even use all of a portion of the $88,000 as a down payment on a new or existing home in order to finance the rest with another HECM loan, thus again having no monthly mortgage payments for the rest of your life.

Next Example: You or your heirs do not want to sell the home to pay off the loan. The entire amount of the loan balance must be paid near the time when the last surviving borrower no longer lives in the home or moves out for more than a year. You can pay the loan balance from other funds, apply to refinance the home through Fidelity Bancorp or a different lender, or your heirs can apply to refinance through another HECM loan if they are 62 years old or older and otherwise qualify. If none of those ways work out, you or your heirs have at least six months to sell the home, and up to 6 months more if you or heirs continue good faith sale attempts.

General HECM Eligibility Rules:

• Minimum Age: All Applicants must be 62 years old or older.
• Income / Credit: There are No financial, income or credit score requirements. They make no difference in an HECM loan because borrowers do not make any payments until the last surviving borrower no longer lives in the home etc, as explained above.
• Eligible Properties: A home that you own and live in as your principal residence. That home can be a single family detached residence, a 1 to 4 Unit property including HUD approved Condominiums, PUDs, and manufactured homes meeting HUD standards
• Occupancy: You must occupy your home as your primary residence, maintain your home in a reasonably good condition, and continue paying property taxes and homeowners insurance.

Required Counseling by a government-certified HECM Counselor:

Mandatory counseling is one of the first steps to take place in the HECM loan process. You can usually choose counseling by telephone or in person. The role of the counselor is to review your situation during this private session, in order to explore potential alternatives that may or may not interest you. After the counseling session, you will be given a counseling certificate that you will need to sign and deliver to us. It’s only after we receive your application and a signed counseling certificate that we can continue the processing of your loan, so do not delay these.

 home equity conversion loans) enable elderly homeowners to tap into their equity without selling their home. The lender pays you money based on the equity you've accrued in your home; you receive a lump sum, a monthly payment or a line of credit. Repayment is not necessary until the borrower sells the property, moves into a retirement community or passes away. When you sell your home or no longer use it as your primary residence, you or your estate must repay the cash you received from the reverse mortgage plus interest and other finance charges to the lender.

Most reverse mortgages require you be at least 62 years of age, have a low or zero balance owed against your home and maintain the property as your principal residence.

Reverse mortgages are ideal for homeowners who are retired or no longer working and need to supplement their income. Interest rates can be fixed or adjustable and the money is nontaxable and does not interfere with Social Security or Medicare benefits. Your lender cannot take property away if you outlive your loan nor can you be forced to sell your home to pay off your loan even if the loan balance grows to exceed property value.