Types of Hawaii Reverse Mortgages

The popularity of Reverse Mortgages has been growing rapidly over the last few years. Today, thousands of retirees have applied for a reverse mortgage, which they are using to improve the quality of life in their retirement years.

After the few rough years experienced by the financial markets, many seniors are worried about how they will pay their bills, travel, and a have a good time during these retirement years.

A Hawaii reverse mortgage can help a residential owner convert a part of their home equity into a reliable income stream, without ever having to sell their family home, give up the title, or be required to pay monthly mortgage payments. However, taxes, insurance and upkeep are required by the homeowner.

Additionally, the income (cash received) from a reverse mortgage is tax-free.

Two Types of Reverse Mortgages in Hawaii

  1. Home Equity Conversion Mortgage

Also known as a HECM is a reverse mortgage is an FHA loan, that is regulated by the US Department of Housing (HUD).

HECM’s are not government loans, but rather, they are loans provided by a mortgage lender and FHA insured by the national government.

An applicant using this type of mortgage is charged an indemnity fee of 1.25% of the mortgage balance each year (built into the loan). The loan balance, therefore, increases by the amount of that fee plus interest.

This fee purchases insurance, which protects the buyer:

  1. When the lender is unable to make a payment
  2. If upon selling the residence, the proceeds are not enough to pay the remaining balance

For the second case, the FHA insurance put in place by the government pays off any balance that is remaining beyond the appraise value.

HECM’s are currently the most popular type of reverse mortgage being offered, and it comes with a stipulation that a borrower receives third-party counseling to discuss the pros and cons of a reverse mortgage.

  1. Proprietary Reverse Mortgage

The private mortgage companies that provides these, privately insures this type of reverse mortgage. Although they are not subject to the same requirements and regulations as HECM, a majority of the companies providing this type of reverse mortgage have emulated the consumer protections that are found in FHA insured HECM’s, including compulsory counseling for all their borrowers.

In some cases, this type of mortgage is only available as a Jumbo loan given that it is only taken for homes that have a higher valuation.

For an FHA insured HECM, the maximum loan limit for a borrower is $625,500. Depending on the borrower’s age, a percentage of that amount is allowed. Usually somewhere between 40 and 60%. Therefore, a person who has a home worth millions of dollars may be able to get more money from the proprietary non-FHA reverse mortgage.

In conclusion, to find out if you qualify and which program is best for you, consult the author of this article or your financial advisor to discuss the pros and cons. For more information you can also visit: www.AlohaMortgageSolutions.com. There you will find 2 short video’s, one explaining reverse mortgages; and the other, testimonials of real Hawaii Clients.

For a FREE, no-obligation quote, contact Daniel Nicolosi at Harbor Financial Group – Your Aloha Mortgage Solution in Honolulu. You can reach him directly at (808) 799-8218 on Oahu; or Toll Free at 888-423-2468 from the Neighbor Islands.


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