There is a new modified version of the Home Equity Conversion Mortgage (HECM) product announced by the Federal Housing Administration (FHA). The modified version allows older home owners to tap into the equity in their home to cover living expenses and health care costs while continuing to live in their homes. The new version allows homeowners to not have to continue to make traditional mortgage or equity loan payments.
The new option will be available for all HECM case numbers assigned after October 4, 2010. The new FHA designed HECM Saver is a second reverse mortgage option to lower upfront closing cosst for homeowners who want to borrow a smaller amount other than what would be available through a standard HECM loan.
Some seniors find out fees are too high for them despite the popularity of out HECM loan. HECM Saver was created to provide seniors with a reverse mortgage option that significantly lowes cosst by eliminating Mortgage Insurance Premiums (MIP) that are required under the standard HECM option.
An upfront premium of .01% of the property value in the HECM Saver plan versus a premium of 2% in the HECM Standard option makes a difference. HECM Standard and Saver plans will be charged monthly for Mortgage Insurance Premiums.
Under the HECM Saver program, it will reduce the upfront fees while substantially lowering the risk to the FHA insurance fund because the principal limit or amount of money available to a borrower under the Saver program will be reduced.
Funds are advanced by HECM to the borrower and interest accrues, but the outstanding amount does not have to be repaid until the borrower dies, leaves the home or sells the property. At that time, if the balance due on the loan exceeds the value of the home, FHA insurance pays the difference. Borrowers may opt to receive funds as a lump sum at the loan origination, establish a line of credit or request fixed monthly payments that will be disbursed for as long as they continue to live in the home.
More information available at: www.hud.gov.
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