A California Reverse Mortgage With Fewer Closing Costs
A California reverse mortgage can be used by homeowners 62 or older that own their homes free and clear or have only a small mortgage balance. The HECM (Home Equity Conversion Mortgage) is a unique home equity loan designed specifically for older homeowners. It allows senior citizens to extract cash from the equity in their homes, without having to make payments on the loan as long as they live in the property.
The high cost of obtaining a reverse mortgage has always been one of the biggest objections with regard to taking out this type of home equity loan. Critics would point out that the costs were twice as much or more than any other type of mortgage loan.
Many arguments can be made to justify the expense and they are 100% valid. However there is no denying that compared to a conventional "forward" mortgage, the cost of a California reverse mortgage is high.
Enter, the HECM Saver. HUD rolled out a lower cost version of the popular HECM Standard, which they call the HECM Saver. This new home equity conversion mortgage is now one of the FHA California reverse mortgage offerings and is also available nationwide. The "Saver" drastically reduces the up-front FHA insurance premium cost. In fact, it brings it to 0.01% of the appraised value of the home, or virtually zero. The HECM Standard is a full 2% of the appraised value. As you can see...a huge difference.
However, the HECM Saver also reduces the amount of money a borrower is eligible to receive by roughly 15 to 20%. If tapping into the maximum amount of money is necessary to pay off an existing mortgage balance, the HECM Saver
may not be an option for everyone. However, if a borrower doesn't need the maximum loan amount, the new HECM could be a great choice and bring with it a huge savings in closing costs.
As a result of declining home values throughout the state of California, not all borrowers will have the option of choosing the HECM Saver. But if you do, it is absolutely worth checking into.
The high cost of obtaining a reverse mortgage has always been one of the biggest objections with regard to taking out this type of home equity loan. Critics would point out that the costs were twice as much or more than any other type of mortgage loan.
Many arguments can be made to justify the expense and they are 100% valid. However there is no denying that compared to a conventional "forward" mortgage, the cost of a California reverse mortgage is high.
Enter, the HECM Saver. HUD rolled out a lower cost version of the popular HECM Standard, which they call the HECM Saver. This new home equity conversion mortgage is now one of the FHA California reverse mortgage offerings and is also available nationwide. The "Saver" drastically reduces the up-front FHA insurance premium cost. In fact, it brings it to 0.01% of the appraised value of the home, or virtually zero. The HECM Standard is a full 2% of the appraised value. As you can see...a huge difference.
However, the HECM Saver also reduces the amount of money a borrower is eligible to receive by roughly 15 to 20%. If tapping into the maximum amount of money is necessary to pay off an existing mortgage balance, the HECM Saver
may not be an option for everyone. However, if a borrower doesn't need the maximum loan amount, the new HECM could be a great choice and bring with it a huge savings in closing costs.
As a result of declining home values throughout the state of California, not all borrowers will have the option of choosing the HECM Saver. But if you do, it is absolutely worth checking into.
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