Hawaii Reverse Mortgage Guide
Are you considering retiring in Hawaii and searching for ways to supplement your retirement income?
One financial tool to consider is the reverse mortgage. Reverse mortgages in Hawaii provide senior homeowners with a financial solution that increases cash flow by tapping into your home’s equity. You can even use a reverse mortgage to purchase a new home if you are looking to relocate to the Aloha State for your retirement.
What sets reverse mortgages apart from traditional mortgages is that they eliminate the need for monthly mortgage payments. Instead, repayment occurs when the homeowner sells the property, moves out, or passes away.
For Hawaii homeowners seeking to boost their income or handle unforeseen retirement expenses, reverse mortgages can be an invaluable tool.
In this guide, we will cover what you need to know about getting a reverse mortgage in Hawaii so you can decide if it aligns with your financial situation and goals.
Understanding Reverse Mortgages
A home equity conversion mortgage (HECM, also known as a reverse mortgage loan, is a financial solution that allows homeowners who are 62 years of age or older to tap into the value of their home without the burden of monthly mortgage payments.
It eliminates monthly mortgage payments by paying off the current mortgage, if there is one.
This federally backed loan then offers reverse mortgage borrowers the flexibility to choose how they receive their funds. Whether you prefer a lump sum, monthly installments, a line of credit, or a combination of these options, a reverse mortgage has several options for you to choose from depending on your needs.
Unlike conventional mortgages, a traditional home equity loan, or a home equity line of credit (HELOCs), a reverse mortgage eliminates the need for monthly payments, which is one way that a reverse mortgage takes stress off of your monthly budget and increases your financial flexibility.
The reverse mortgage is typically repaid upon the sale of the home, if it is no longer your primary residence, or when the homeowner passes away.
Types of Reverse Mortgages Available in Hawaii
In Hawaii, qualifying homeowners have access to four types of reverse mortgages:
Home Equity Conversion Mortgage (HECM)
The HECM reverse mortgage is the most common type offered by lenders in Hawaii, including Mutual of Omaha Mortgage. These loans are backed by the Federal Housing Administration (FHA) and regulated by the U.S. Department of Housing and Urban Development (HUD). To be eligible, borrowers must be 62 years of age or older. There are no restrictions on how the funds from these reverse mortgages can be used, but there is a lending limit set by the FHA. As of 2024, the limit is $1,149,825.
Single-Purpose Reverse Mortgage
Single-purpose reverse mortgages are less common in Hawaii. They are also known as property tax deferral programs and deferred payment loans. Like other reverse mortgages, they are available to homeowners who are at least 62 years old. However, these reverse mortgages can only be used for a specific purpose approved by the lender, which is typically a home improvement project.
Jumbo Reverse Mortgage
Jumbo reverse mortgages in Hawaii allow homeowners to borrow more than the FHA lending limit of $1,089,300. These proprietary reverse mortgages are offered by individual lenders and are not backed by the FHA. While jumbo reverse mortgages often come with higher interest rates, they do not require mortgage insurance premiums.
Reverse Mortgage for Purchase
The HECM for Purchase program is a unique financial tool that enables homeowners in Hawaii to finance part of their new home with a reverse mortgage. This option allows older homeowners to upsize or downsize in retirement without taking on monthly mortgage payments. It involves combining the reverse mortgage with a substantial down payment from the sale of a previous home. This may also be a great option for those looking to relocate to Hawaii for retirement.
Hawaii Reverse Mortgage Requirements
To qualify for a reverse mortgage loan in Hawaii, homeowners must meet the following requirements:
- Age Requirement. At least one homeowner must be at least 62 years old.
- Primary Residence. The home must be the primary residence of the homeowners.
- Equity. Homeowners need to have equity in their home.
- Condition of the Home. The home must be in good condition.
- Financial Obligations. Homeowners must be able to continue paying property taxes, homeowner’s insurance, HOA fees (if applicable), and maintain the home.
- Eligible Property Types. The property must be eligible for a reverse mortgage, which includes single-family homes, two-to-four-unit properties where homeowners occupy one unit, FHA-approved condominiums, or approved manufactured homes.
- Counseling Session. Prospective borrowers must complete a counseling session with a third-party counseling service approved by HUD.
Hawaii Reverse Mortgage Borrower Rights
Hawaii residents have the same protections offered to reverse mortgage borrowers by the FHA and HUD.
In addition, if a reverse mortgage lender in Hawaii fails to have an applicant complete the required reverse mortgage counseling session with a HUD-approved counselor, then that lender can be penalized, according to a Hawaii state statute.
Hawaii Reverse Mortgage Calculator
If you’re thinking about getting a reverse mortgage loan and want to know how much you could qualify for, take a look at our Reverse Mortgage Calculator.
Keep in mind that the amount given by this calculator is just an estimate. For more precise numbers, we suggest speaking with one of our reverse mortgage loan officers.
The Hawaii Reverse Mortgage Loan Application Process
It is important to note that the reverse mortgage application process is not a quick one. In some cases, it can take up to 45 days to complete. Therefore, if you are seriously considering pursuing a reverse mortgage in Hawaii, it is advisable to start the application process without delay.
One of the key benefits of a reverse mortgage is the ability to cancel the application at any time, including up to three business days after signing the closing loan documents. This provides an added layer of protection for borrowers who may have second thoughts.
If you choose to apply for a reverse mortgage with Mutual of Omaha Mortgage in Hawaii, here is an overview of what you can expect:
Step 1: Consultation with a Reverse Mortgage Loan Officer
The first step is to meet with one of our reverse mortgage loan advisors who will assess your situation, provide an estimate of potential benefits, and address any questions you may have. The Mutual of Omaha Mortgage loan specialists will work with you through the entire process.
Step 2: Counseling Session
Following your financial review with your reverse mortgage advisor, you will be required to complete a counseling session with a HUD-approved third-party counselor. This session aims to educate you about the features and suitability of reverse mortgages, as well as other available financial options. Upon completion, you will receive a certificate that must be presented to your advisor before officially filing the reverse mortgage application.
Step 3: Submit the Application
Once you have obtained the counseling certificate, your reverse mortgage loan advisor will assist you in submitting the application along with the necessary documentation. This may include providing a photo ID, homeowner’s insurance policy, and property tax bill. Gathering these documents at this stage will expedite the loan process.
Step 4: Appraisal and Information Gathering
After submitting your application, Mutual of Omaha Mortgage will order a home appraisal to evaluate the condition and market value of your Hawaii property. This appraisal helps determine the eligible loan amount. Additionally, we will obtain a title and credit report to check for any liens and assess your financial health. This step typically takes one to two weeks to complete.
Step 5: Processing and Underwriting
Once the application and documentation have been submitted, our team will initiate the manual underwriting process. During this stage, the underwriter verifies that all reverse mortgage requirements are met and determines whether the loan is approved. In some cases, the underwriter may request additional documentation or home repairs before finalizing the loan. Your reverse mortgage loan advisor will keep you informed about any necessary actions.
Step 6: Closing
Upon approval of your application, a closing date will be scheduled. You will have the option to sign the closing documents either at home with the assistance of a mobile notary service or in person at the title company.
Step 7: Funds Disbursement
Following the signing of the closing documents, there is a mandatory three-business-day waiting period before the funds are disbursed based on the method(s) selected during the application process.
Find a Hawaii Reverse Mortgage Loan Officer in Your Area
Mutual of Omaha Mortgage is a licensed Reverse Mortgage lender in the state of Hawaii. You can get started by calling 800-578-0283 or filling out this form here.
You can also find a Hawaii Reverse Mortgage loan officer in your area through our loan officer directory.
Reverse mortgage borrower must occupy home as primary residence and remain current on property taxes, homeowner’s insurance, the costs of home maintenance, and any HOA fees.
This information is intended to be general and educational in nature and should not be construed as financial advice. Consult your financial advisor before implementing financial strategies for your retirement.