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Types of Reverse Mortgages

HECM (Home Equity Conversion Mortgage) is an FHA insured mortgage administered by HUD.  introduced in 2010 the fixed and variable options described below are and available in a Saver Program which is a lower cost option for the fixed and variable rate HECM loans. Fixed Rate HECM – Standard has a fixed rate throughout the term of the loan.  All of the proceeds must be taken up front in a lump sum at closing.  The Fixed Rate HECM is typically used when a borrower is paying off an existing mortgage on their home or would benefit by receiving all of their proceeds at once and desires the security of a fixed rate loan. Variable Rate HECM – Standard is a variable rate loan tied to the LIBOR index plus a margin.  The proceeds from a variable rate loan can be taken in a lump sum, a monthly tenure, or left in a credit line for access when needed.  A combination of the option for drawing proceeds is also available to match a borrower’s needs. Saver Program is available for both the Fixed Rate and Variable Rate HECM.  This option is used when the borrower does not need access to the full amount available under the standard program.  The saver program virtually eliminates the upfront mortgage insurance premium paid to FHA while still retaining the same protection. HECM for Purchase is a form of reverse mortgage where the purchase of a home is accomplished with a reverse mortgage.  The borrower supplies a down payment which creates equity, and the reverse mortgage provides the balance of the purchase price of the home. Note –  while we could include an example comparing the funds that would be available under each of the HECM options – it is much more clear and understandable when that example relates specifically to your situation.  It is straightforward to do and we are happy to provide it without charge or obligation.  All that is needed is the value of your home, the current mortgage balance, and the ages of all borrowers.

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