A lower cost option for homeowners 62 or better who may be considering a reverse mortgage:
The HECM Saver
FHA designed HECM Saver as a second initial mortgage insurance premium (MIP) option for the purpose of lowering upfront loan closing costs, for mortgagors who want to borrow a smaller amount than what would be available with a HECM Standard.
Based upon a $200,000 home value the Upfront MIP on the HECM Saver would be only $20 versus the HECM Standard's Upfront MIP cost of $4000.00, a considerable difference.
The HECM Saver and the HECM Standard both will have ongoing MIP Premiums at 1.25% of the outstanding principal balance on an annual basis, compounded monthly. In effect, a bump to the interest rate the homeowner is accruing to the balance. This is kin to the monthly MIP charged on the forward side, except of course the amount accrues to the loan as there are no required monthly payments on either the Saver or Standard.
The HECM Saver does not loan as much as the HECM Standard, but for many homeowners this is just fine as they have plenty of equity and are not looking to borrow as much anyway. I've had many clients who asked me, "I don't need to borrow that much - if I take less will the costs go down?" The HECM Saver is a possibility to meet those needs.
The HECM Saver will be available for as a refinance loan or a reverse for puchase loan.
This new reverse mortgage product is insurable beginning October 4, 2010 however homeowners may not be able to apply for this type of loan right now. Lenders are still waiting for further instructions from HUD to implement it and also trying to gauge the secondary market to see if there is a demand from investors for these mortgage investments. I think there will be and I'm very excited to learn more about the HECM Saver and how it can become a useful financial tool in the right circumstances.
As always, I appreciate your comments, questions and concerns.
By Deborah Nance
Your Local Southern California Reverse Mortgage Professional
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iReverse Home Loans, LLC, NMLS#810502 originates reverse mortgages in Alabama, Alaska, Arizona (MB-0919584), California, Colorado, Connecticut, Florida, Illinois, Indiana, Iowa, Kansas, Louisiana, Maryland, Massachusetts, Minnesota, Mississippi, Missouri, Nevada, New Jersey, New Mexico, Ohio, Oregon (ML-5378), Pennsylvania, South Dakota, Tennessee, Texas, Utah, Vermont (1164-MB), Virginia, Washington and Wisconsin.
Important Information: Reverse Mortgages are neither "endorsed" nor "approved" by the Federal Government. The FHA (Federal Housing Administration) provides certain insurance benefits for lenders and borrowers in connection with the lender’s HECM loans; the FHA does not make or originate loans. The owner(s) retain title to the property that is the subject of the reverse mortgage until the person sells or transfers the property and is therefore responsible for paying property taxes, insurance, maintenance and related taxes. Failing to pay these amounts or failure to maintain the condition of your property may cause the reverse mortgage loan to become due immediately. A reverse mortgage is a complex loan secured by your home. Whether such mortgage makes sense for you depends on your financial situation and needs. For these reasons, we strongly recommend that you consult with a qualified independent housing counselor, family members and other trusted advisers before making this decision. This website is not from HUD or FHA and was not approved by HUD or any government agency.