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"The Federal Housing Administration (FHA) sets limits on how much a HECM "reverse mortgage" lender may lend you—based on your age"

Home Equity Conversion Mortgage

A Home Equity Conversion Mortgage (HECM) is a federally insured reverse mortgage. Ninety-five percent of all reverse mortgages are HECM’s. The Federal Housing Administration (FHA) sets limits on how much a HECM reverse mortgage lender may lend you—based on your age, your home's value and location—and what your total loan costs will be. HECM loans give you a wide choice in how you may receive the cash from the reverse mortgage. HECM loans generally provide the larger loan advances than other reverse mortgages (if you go over the HECM loan limits, you would then look at the Jumbo Reverse Mortgage).

Frequently Asked Questions (FAQs) about HECM reverse mortgages.

Frequently Asked Questions (FAQs) about reverse mortgages in general.

Home Equity Conversion Mortgage Standard Fixed

Fixed Rate HECM loans allow reverse mortgage borrowers to get a fixed rate on their loan without ever having to worry about the fluctuations of rates rising and declining. This product is exclusively for borrowers who wish to draw all of their available funds in a lump sum at the time of closing. In most cases this product is ideal for seniors who currently have a large mortgage balance because they would have to take a lump sum to pay it off.

The interest rate for the HECM Fixed Rate product is comparable to that of a conventional forward mortgage (The interest rate is determined by market conditions); however, no mortgage payments are required as long as the borrower lives in the home.

The HECM Fixed Rate eliminates the complexity associated with an adjustable rate loan, making it easier for the homeowner to decide if HECM Fixed Rate is a sound financial decision. Borrowers will have the comfort of knowing exactly how much money they may pass on to their estate because the interest accrual for the HECM Fixed Rate is known. With the overall acceptance of reverse mortgages on the rise, the HECM Fixed Rate is another step in the right direction to help focus on the needs of older Americans. It helps by enhancing their financial well-being, independence, and peace of mind.

Call one of our advisers today to find out if a HECM Fixed Rate reverse mortgage is more beneficial for you than a traditional reverse mortgage. We will give you a side by side comparison so you can make a smart decision looking at the benefits from both products over the long and short term.

Frequently Asked Questions (FAQs) about reverse mortgages in general.

Home Equity Conversion Mortgage Standard Adjustable

The adjustable rate HECM provides you with greater flexibility because it generally provides more options for receipt of the reverse mortgage proceeds (ie: line of credit, monthly payments, lump sum, or a combination of monthly payments and a line of credit). If you chose the line of credit option you withdraw your loan funds as and when you need them from a line-of-credit account, and the amount of funds remaining available to you in that account grows larger each month. Adjustable reverse mortgages have interest rates that increase or decrease as a market interest rate index changes. The index currently used is the LIBOR. LIBOR stands for “London Inter-Bank Offered Rate”. An adjustable rate will accrue interest at a much lower rate at today’s rates, but has a 10% cap and can go much higher if rates rise in the future.

Frequently Asked Questions (FAQs) about reverse mortgages in general.

Home Equity Conversion Mortgage Saver Fixed

The HECM Fixed Saver has similar benefits as the Standard Fixed. The differences are that the fixed rate on the HECM Saver is slightly higher but you will have lower closing costs. The up-front mortgage insurance premium required by the Federal Housing Administration is significantly reduced. As a result, you could save thousands of dollars, depending on your home’s value. For a standard HECM loan, the up-front mortgage insurance premium (UFMIP) is 2% of the property value or the HUD lending limit, whichever is less. The new HECM Saver carries with it an UFMIP of just .01% which is an incredible difference. The disadvantage of the HECM Saver is that the amount of equity to the borrower will be much lower then they would with the HECM Standard program. So for a borrower looking to take advantage of the most money out to payoff existing mortgages and other liens the HECM Saver may not be the best option.

Home Equity Conversion Mortgage Saver Adjustable

The HECM Adjustable Saver has similar benefits as the Standard Adjustable. The differences are that the adjustable rate on the HECM Saver is slightly higher but you will have lower closing costs. The up-front mortgage insurance premium required by the Federal Housing Administration is significantly reduced. As a result, you could save thousands of dollars, depending on your home’s value. For a standard HECM loan, the up-front mortgage insurance premium (UFMIP) is 2% of the property value or the HUD lending limit, whichever is less. The new HECM Saver carries with it an UFMIP of just .01% which is an incredible difference. The disadvantage of the HECM Saver is that the amount of equity to the borrower will be much lower then they would with the HECM Standard program. So for a borrower looking to take advantage of the most money out to payoff existing mortgages and other liens the HECM Saver may not be the best option.

Frequently Asked Questions (FAQs) about HECM reverse mortgages.

Frequently Asked Questions (FAQs) about reverse mortgages in general.

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*As of October 4th, 2010

HECM Type	Type	Monthly Service Fee	Upfront MIP	Payment Options Available
Standard	Fixed	$0	2.00%	Cash Lump Sum Only
Standard	ARM	$0	2.00%	Lump Sum, Line of Credit, Monthly Payment, Combination
Saver	Fixed	$0	0.01%	Cash Lump Sum Only
Saver	ARM	$0	0.01%	Lump Sum, Line of Credit, Monthly Payment, Combination

**Example - On a standard fixed or adjustable rate mortgage at a value of $300,000 the upfront mortgage insurance premium paid through the loan would be $6,000.

On a Saver fixed or adjustable rate mortgage at a value of $300,000 the upfront mortgage insurance premium paid through the loan would be $30.

* Subject To Change Without Notice

Home Equity Conversion Mortgage (HECM) Frequently Asked Questions

o        Q. Since federally-insured HECM loans are regulated by the U.S. government, are all HECM loans the same?

o        A. Yes and no. All HECM lenders must follow HUD rules and many of the loan costs. Including the interest rates. But there are different margins offered by different lenders. We will always offer you the lowest margin which would maximize your cash and minimize your cost.

o        Q. What are the eligibility requirements for a HECM loan?

o        A. You, and any other current owners of your home, must be aged 62 or older. The home must be your primary residence. It may be either a single-family residence in a 1- to 4-unit dwelling, a condominium, or part of a planned unit development (PUD). Though some manufactured housing is eligible, most cooperatives and most mobile homes are not. The home must be at least one year old and meet HUD's minimum property standards. Finally, you must agree to discuss the program with a counselor from a HUD-approved counseling agency.

Note: If the house is not up to HUD's standards, you may use the HECM loan to pay for repairs that may be required to bring it up to their standards.

o        Q. Does the location of our home also affect the size of a HECM loan?

o        A. Yes. The size of a HECM loan depends on the maximum lending limit, this was recently changed, the new national lending limit is $625,500. Go to HUD's web site to see the lending limit changes.

o        Q. Are there any advantages by taking my HECM loan as a line of credit?

o        A. Yes. That's because a HECM line of credit continues to grow over time, increasing the amount of cash available to you until you withdraw all of it. That is possible because the remaining balance in your line of credit grows by the same total rate that is charged on your loan balance.

Consider this example. Say you have a HECM line of credit of $150,000 and you withdraw $25,000. The remaining line of credit would be $125,000. If your next withdrawal is a year later you would have more than $125,000 available to you. Here's how it works to your advantage: if the total loan rate is, for instance, 6%, your available credit line would be 6% higher than it was a year earlier. Instead of having $125,000 available you would have $132,500 in your line of credit (6% of $125,000 = $7,500). In this example, you would have an extra $7,500 available to you in year two of your reverse mortgage. A nice added bonus.

o        Q. How are the interest rates computed for a HECM reverse mortgage?

o        A. The HECM rates are based on the LIBOR interest rates plus margin. It is adjusted either monthly or annually.

o        Q. Are HECM loans available throughout the U.S.?

o        A. HECM loans are available in all 50 states, including the District of Columbia.

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