Reverse Mortgage Loan Program Choices
There are three main Reverse Mortgage Products:
Home Equity Conversation Mortgage (HECM) Reverse Mortgage
The Home Equity Conversation Mortgage or HECM is the most popular Reverse Mortgage program accounting for over 95% of Reverse Mortgages. Available since 1989, it is the only government insured program through the Federal Housing Administration (FHA), a part of the U.S. Department of Housing and Urban Development (HUD).
How much you can borrow is determined by your age, your homes' value, and location of your home. The HECM generally provides the larger loan amounts than the Home Keeper.
There are seven HECM programs: the HECM 125; HECM 150; HECM HML65; HECM HML75; HECM HML85; HECM Annual; and HECM Fixed. Your Reverse Mortgage Specialist will explain the differences in these programs and which program best fits your situation.
As part of your closing costs, the HECM includes a 2% up-front mortgage insurance premium plus a monthly premium thereafter paid to HUD. The insurance premium guarantees that if the loan servicer goes out of business, the government will make the payments.
The Cons of the HECM are: higher closing costs due to the government insurance and loan limits.
The Pros of the HECM are: higher loan amounts, 2 to 4 family property eligibility, government guaranties through mortgage insurance, lower rates.
Fannie Mae Home Keeper Reverse Mortgage
The Home Keeper reverse mortgage is a government sponsored program but is not government insured. The Home Keeper can have higher loan amounts than the HECM for homeowners with high property values. The Home Keeper also allows for purchases of new homes.
The Cons of the Home Keeper are: higher rates than the HECM, single family and condominium properties only, generally lower loan amounts than the HECM, and no government mortgage insurance.
The Pros of the Home Keeper are: lower closing costs than the HECM due to a lack of mortgage insurance, higher loan limits that can have higher loan amounts for some high value properties, and purchases can be made on single and condominium properties.
Financial Freedom Cash Account Plan
The Cash Account Reverse Mortgage has virtually no loan limit and is used by homeowners that have substantial home equity.
The Cons of the Cash Account are: only two payment plans - credit line and lump sum and higher rates than the HECM and Home Keeper.
The Pros of the Cash Account are: low to no closing costs and very high loan amounts for very expensive homes.
Your Reverse Mortgage Loan Specialist will explain the differences and help you determine the program that fits your situation.
Mortgage Trust Group, Inc.
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