HECM SAVER REVERSE MORTGAGE

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October 4th, 2010 The FHA has just announced the Federally insured HECM Saver reverse mortgage, a modified version of the traditional HECM mortgage with even more benefits for those who are looking to borrow.

“The new HECM Saver effectively eliminates the upfront mortgage insurance premium, charging just 0.01 percent of a home’s value. On a $200,000 home, that means you’ll pay an upfront premium of just $20. More savings or access to more of your home’s equity.”

What is a HECM Saver Reverse Mortgage? In exchange for borrowing a lower amount, the HECM Saver charges drastically lower upfront fees ( the upfront mortgage insurance is only .01% compared to 2% for HECM standard). HECM is short for Home Equity Conversion Mortgage, the reverse mortgage program insured by the FHA. The vast majority of reverse mortgages are HECMs.

Who Can Qualify For A HECM Saver Reverse Mortgage?

  • Borrowers must be 62 years or older
  • You own the home ( can have existing mortgage)
  • Home must be your primary residence ( you have to live in the home)
  • Never have defaulted on any Government debt
  • Must have enough equity in the home
  • If you have existing mortgage the reverse loan will pay it off
if you own a mobile home – manufactured homes HECM reverse mortgage
What are my options with a HECM Saver Loan
You can choose between a fixed rate HECM Saver or an adjustable rate HECM Saver – the main difference being that one has a fixed rate while the other has an adjustable rate.
The fixed rate version comes with no origination fees – while the adjustable rate version is better for seniors who are only utilizing the loan for a very short amount of time.
If you are comfortable with receiving less of the equity upfront you can choose one of the HECM Saver programs and save in overall mortgage insurance premium – the HECM standard major costs is just that as the fee is levied against the value of the home.
***update there are now lenders who are going to be checking your income, credit scores, and mortgage payment history in order to verify your ability to maintain this property ( taxes, and insurance). 

You must maintain property taxes, insurance and occupy home as your primary residence.

HECM Saver Pros and Cons

Pros of the HECM Saver reverse mortgage

  1. Tax Free Income – money you receive from your reverse mortgage is tax free
  2. Choose how you receive income – you can receive this income either in monthly payments, as a lump sum, or as a credit line that grows every year
  3. Stay in your home ( no need to move or live in a nursery home)
  4. Want to leave the home to your heirs – you can do this with a reverse
  5. Use the money how you want it ( no restrictions on how you can spend your money)
  6. Live in retirement years ( travel, help family, explore)
  7. Relatively easy to qualify ( own home, be 62, no default on government debt)
  8. Allows for you to include other debts into the loan ( pay high interest rate balances with the reverse loan, and never have another monthly payment)
  9. 2011 Loan Limit is at $625,000 which is the highest it has ever been, therefore you can borrow more of the equity tied up in your home
  10. If you “outlive the loan,” or in technical terms receive more income than the home is worth, you wont have to pay that back as you will never ow more than the value of the home, according to the Federal Trade Commission.
  11. No payments are due until last surviving borrower dies, sells home or no longer lives in home as primary residence. You have 12 months after leaving the home that the loan is called or due ( so if medical conditions arise you have 12 months to return home).
  12. After the home is sold and the loan/fees are paid back to the lender, any remaining equity in the home belongs to you or your heirs/estate.
  13. In 2011 Lenders have started to dramatically reduce closing costs involved with reverse mortgages therefore giving you more of your equity. The HECM Saver has the lowest closing costs and insurance costs but you cannot receive as much equity.
  14. With the HECM Saver you pay less in closing fees – we currently have some lenders who are doing a no fee reverse mortgage.

Cons of HECM Saver Reverse Mortgages

  1. Mortgages are expensive with fees ( we will compare the entire market on your behalf so that you save both time and money)
  2. You are borrowing against home so less money will go to estate once loan is due ( unless home values go up and they can sell home for more money)
  3. Borrowers must be at least 62 years or older to qualify
  4. Interest on the home loan is not tax deductible until the loan is paid off.
  5. You are responsible to pay for property taxes and insurance.
  6. Mandatory counseling and test ( some view this as a pro since it protects seniors) ( you currently have to pay the fee to have this counseling done)
  7. Tougher appraisal standards and lenders have less control of the home values therefore if your property does not appraise you could not qualify for the loan.
  8. HUD implemented independent appraisers, lenders cannot argue the value or most likely the value will be substantially less then what homeowners thought

Overall seniors should be very happy with this program as it aims to allow you to reach more of your homes equity, without any drawback, and with the current housing situation we expect many more seniors will receive the federally insured HECM saver mortgage.

to learn more:

reverse mortgage calculator
HECM saver how does it work
reverse mortgages pros and cons
reverse mortgages how they work
what is a reverse mortgage
reverse mortgage rates

HECM SAVER REVERSE MORTGAGE | RELEASE EQUITY LOWER FEES By Paul Galante – Add me to your circles

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