In late 2010, the Federal Housing Administration launched a new type of reverse mortgage called a Home Equity Conversion Mortgage Saver, which reduces most of the 2 percent up-front insurance rate that borrowers have to pay from standard federal backed loans.
However HECM Saver – is offered only to homeowners 62 years old and over. The Saver’s up-front premium is only 0.01 percent. This up-front premium difference is huge, particularly as the loan rate increases. The current yearly fees that borrowers have to pay are similar as for an average reverse mortgage of 1.25 percent of the loan’s existing balance. Although Saver borrowers are limited only to borrow 10 to 23 percent less than the average version permits.
A perfect applicant for the HECM Saver is a senior citizen with a permanent income or resources who has long-term needs further than the need for temporary money. “The HECM Saver is ideal for their situation because there are enough proceeds [to do so],” says Beth Paterson of Reverse Mortgages SIDAC, St. Paul, Minn.
“The HECM Saver is a breakthrough product that will enable more seniors to access the advantages reverse mortgages can provide,” says Eric Declercq, national sales lead for reverse mortgages at MetLife Bank, Bloomfield, New Jersey. “It increasingly will become an important financial planning tool for America’s senior population looking to use the equity built up in their homes to finance a comfortable retirement.”
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