HUD ANNOUNCES NEW REVERSE MORTGAGE OPTION
The Federal Housing Administration (FHA) announced a new modified version of its Home Equity Conversion Mortgage (HECM) product. The HECM loan is a reverse mortgage insured by the federal government.
"FHA designed HECM Saver as a second reverse mortgage option for the purpose of lowering upfront loan closing costs, for homeowners who want to borrow a smaller amount than what would be available with a HECM Standard loan. This option will be available for all HECM case numbers assigned on or after October 4, 2010.
"Despite the popularity of our HECM loan product, we have noted concerns that some senior citizens find that our fees are too high for them," said FHA Commissioner David Stevens. "In response, we created HECM Saver which will provide seniors with a reverse mortgage option that significantly lowers costs by almost eliminating the upfront Mortgage Insurance Premium (MIP) that is required under the standard HECM option."
HECM Saver will have an upfront premium of only .01 percent of the property's value. Under the HECM Standard option, the upfront premium will remain at 2 percent. The MIP for both HECM Saver and HECM Standard will be charged monthly at an annual rate of 1.25 percent of the outstanding loan balance.
The reduction in upfront fees will be accomplished while substantially lowering the risk to the FHA insurance fund because the principal limit or amount of money available to a borrower under the HECM Saver program will be reduced. Borrowers will receive approximately 10 toe to 18 percent less under the HECM Saver option, than they would receive under HECM Standard.
HECM borrowers may opt to receive funds as a lump sum at loan origination, establish a line of credit or request fixed monthly payments that are disbursed for as long as they continue to live in the home. Funds are advanced 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."
Are you "waiting for the real estate market to recover" to sell your existing home and retire somewhere warmer (like Charleston, SC?). Well, you don't have to wait! You can get a reverse mortgage on your higher priced home, buy a cheaper home down South with that money and have no mortgage payments for your first home! Then, when the market in your home town improves and you can sell for a better price, pay your reverse mortgage off, and live off the difference!