Reverse Mortgage for NJ Seniors

The HMFA offers HECM reverse mortgage loans. A HECM loan is an FHA-insured reverse mortgage allowing seniors (62 and over) to access the equity in their home without a monthly repayment schedule for as long as they live in the home. The program assists older homeowners to access money by using the equity in their homes as collateral. Loan proceeds can be taken in a lump sum, monthly payments, line of credit or some combination of these options. Loan amount is determined by property value and borrower age. Counseling is required. No restriction on value of property. No income requirements or verification. FHA maximum mortgage amounts apply against amount borrowed for the FHA product. Further detail is available on our Fact Sheet (below) or call 1-800-NJ-HOUSE.

Fact Sheet
A Reverse Mortgage is a special type of mortgage that allows homeowners, age 62 or over, to tap into the equity in their existing homes, or to purchase a new home. Under the Agency’s program no repayment is required until the homeowner no longer occupies the home as their principal residence. The loan plus all accrued interest can be prepaid, but generally is repaid from the proceeds from the sale of the home. Any funds remaining after repayment of the loan are paid to the borrower or their estate.

1. PURPOSE: To provide eligible homeowners a monthly income, a line of credit, or a combination thereof from the equity in their homes.
2. ELIGIBLE BORROWERS: Persons 62 years of age or older who own their home. Any existing lien must be paid at time of closing.
3. ELIGIBLE PROPERTIES: One unit dwelling, 2- to 4-family dwellings (borrower must reside in one of the units), and HUD approved condominiums. Property must be borrowers’ principal residence and remain their primary residence for the life of the loan.
4. APPLICATION FEE: $300 (covers partial cost of appraisal) credited toward closing cost.
5. ORIGINATION FEE: $1,800 paid at the time of closing or the option to pay fee from proceeds of loan.
6. MORTGAGE INSURANCE: HMFA offers the Home Equity Conversion Mortgage (HECM). The HECM Program requires a MIP of 2% of the principal limit amount and annual premiums of 1/2% per year on the outstanding mortgage loan balance.
7. CLOSING COSTS: May be included in the loan. Costs include title search and insurance, survey, recording fees, legal fees, the HECM 2% mortgage insurance premium, and other normal and reasonable closing expenses.
8. SERVICING FEE: A fee in the amount of $25 will be charged monthly to service the account.
9. INTEREST RATE: Rate for the basic annual adjustable FHA Home Equity Conversion Mortgage is tied to the 1-year US Treasury Security rate plus the FHA margin. The rate cannot increase more than 5% over the life of the loan and cannot increase by more than 2% in any year. Other terms apply if the borrower chooses a monthly adjustable rate plan.
10. PRINCIPAL LIMIT: The principal limit at origination is based on the age of the youngest borrower, the expected average mortgage interest rate and the maximum claim amount. The maximum claim amount is set at the lesser of the appraised value or the maximum principal amount allowed by county. The limit is based on a one family dwelling that can be insured by FHA.
    1. TENURE: The borrower will receive equal monthly payments from the lender for as long as the borrower occupies the property as a principal residence.
    2. TERM: The borrower will receive equal monthly payments for a fixed period selected by the borrower.
    3. LINE OF CREDIT: The borrower will receive the mortgage proceeds in unscheduled payments or installments, at the times and in the amount of the borrower’s choosing, until the line of credit is exhausted.
    4. MODIFIED TERM OR TENURE: The borrower may combine a line of credit with monthly payments. In exchange for reduced monthly payments, the borrower will set aside a specified amount at closing for a line of credit, on which he or she can draw until the line of credit is exhausted.

    The borrower may change the above type of payment plan throughout the life of the loan. A fee of $20 will be incurred for a change. (A draw under an existing line of credit does not result in a new payment plan.) Examples of changes to a payment plan may include the borrower receiving an unscheduled payment, suspending payments or receiving the entire net principal limit remaining in a lump sum payment.

    Figure sheets can be done upon request for the plans available.

    If either of the term plans are selected the borrower may remain in the home without starting repayment. Borrowers cannot be forced to sell or vacate the home as long as it is their principal residence.

11. REQUIRED INFORMATION MEETING: The borrower will be required to attend an information meeting as required by a HUD approved Housing Information Agency before the loan application is taken for the HECM Program. These sessions will focus on the different types of home equity conversion mortgages available, the suitability of a home equity conversion mortgage, and the alternatives to a home equity conversion mortgage.
12. MORTGAGE DUE AND PAYABLE: A mortgage becomes due and payable when:A. The borrower no longer occupies the property as his or her principal residence;
    B. The borrower does not occupy the property for 12 months for health reasons;
    C. The borrower is deceased; and
    D. The borrower violates the mortgage covenants.
13. TAXES AND INSURANCE: The borrower will be responsible for making these payments.
14. HMFA Approved Lender ListEXAMPLE: TENURE PLAN BASED ON MAXIMUM MORTGAGE PRINCIPAL LIMIT SET BY FHA.