Tips On Finding The Best Reverse Mortgage Loan
Robin OBrien
March 30, 2008
It can be a tough, though excellent decision, to get a reverse mortgage loan however, it can be tougher in finding one that best suits your needs. Choosing the wrong product, can cost you thousands of dollars - money you could have spent on improving the quality of your life. To help your decision, here are some tips on what's on offer and what each program offers.
There are three types of program available to seniors. We'll start by taking a look at the most popular and then look at the more complex programs - sometimes called jumbo reverse mortgage loans.
HECM Reverse Mortgage Loan
This is by far the most popular program and account for over 90% of all loans. Its popularity is mainly because it is insured by the US government using the FHA insurance scheme. HECM stands for Home Equity Conversion Mortgages and is administered by the U.S. Department of Housing and Urban Development (HUD). This program is often called a HUD or FHA reverse mortgage.
Here are its key points:
The maximum amount that can be borrowed is based on the value of the equity in the home, its location, current interest rates and the age of the borrower(s). At present the maximum amount that can be borrowed varies from $200,160 to $362,790.
The property must be a single family dwelling or two-to-four unit. Some other types of dwelling are also eligible such as, townhouses, detached homes, units in condominiums and some manufactured homes.
FHA's reverse mortgage program collects funds from insurance premiums charged to the homeowners. An upfront insurance premium of 2% is charges based on the maximum amount that can be borrowed, with an annual premium of 0.5% that is paid on a monthly basis for the life of the loan.
There are 5 payment plans to choose from, all of which can be changed whenever the borrower wishes - a small charge is made for doing so. The plans are:
Tenure - equal monthly payments as long as at least one borrower lives and continues to occupy the property as a principal residence.
Term - equal monthly payments for a fixed period of time.
Line of Credit - unscheduled payments or in installments, at any time and any amounts until the line of credit is exhausted - this option is not available in Texas.
Modified Tenure - combination of line of credit with monthly.
Modified Term - combination of line of credit with monthly payments for a fixed period of time.
Home Keeper Reverse Mortgage Loan
This program is administered by Fannie Mae and is similar in many ways to a HECM. However, the key differences are that more property types are eligible, the maximum amount that can be borrowed is higher, singles can borrow more though couples less and a line of credit does not grow, unlike a HECM.
Any broker who sells the Home Keeper program must also offer the HECM program. Both require that the borrower receive information and counseling from an independent third party.
Jumbo Reverse Mortgage Loan
These are proprietary programs set up and run by private companies. The biggest attraction of these schemes is that there is no maximum amount that can be borrowed; the limit is set by the value of the home. Owners of high-value homes who want to unlock as much cash as possible would be best accommodated by a jumbo reverse mortgage. However, the cost of these is higher, so a potential borrower should fully understand the charges involved.
The following are some of the larger programs currently being offered to seniors.
Financial Freedom was the first proprietary Jumbo Reverse Mortgage program and is called the Cash Account Advantage.
Wells Fargo does not have its own program buy is a Financial Freedom licensed broker.
Generation Mortgage offers a product called, Generation Plus.
Bank of America offers The Independence Plan.
Countrywide offers a product called Simple Equity.
BNY Mortgage/Everbank currently has two versions: the Prime Advantage Fixed Rate Reverse Mortgage and the Prime Advantage Adjustable Rate Mortgage.
When dealing with a broker, make sure you aren't 'up sold' a proprietary product when a HECM of Home Keeper reverse mortgage loan would suffice. If in doubt, seek further advice from another broker or your independent financial advisor.
The above is a brief overview; follow the links for more detailed information on a reverse mortgage loan and find out which would be best for you, whether it is a FHA reverse mortgage, Home Keeper reverse mortgage or jumbo reverse mortgage.
There are three types of program available to seniors. We'll start by taking a look at the most popular and then look at the more complex programs - sometimes called jumbo reverse mortgage loans.
HECM Reverse Mortgage Loan
This is by far the most popular program and account for over 90% of all loans. Its popularity is mainly because it is insured by the US government using the FHA insurance scheme. HECM stands for Home Equity Conversion Mortgages and is administered by the U.S. Department of Housing and Urban Development (HUD). This program is often called a HUD or FHA reverse mortgage.
Here are its key points:
The maximum amount that can be borrowed is based on the value of the equity in the home, its location, current interest rates and the age of the borrower(s). At present the maximum amount that can be borrowed varies from $200,160 to $362,790.
The property must be a single family dwelling or two-to-four unit. Some other types of dwelling are also eligible such as, townhouses, detached homes, units in condominiums and some manufactured homes.
FHA's reverse mortgage program collects funds from insurance premiums charged to the homeowners. An upfront insurance premium of 2% is charges based on the maximum amount that can be borrowed, with an annual premium of 0.5% that is paid on a monthly basis for the life of the loan.
There are 5 payment plans to choose from, all of which can be changed whenever the borrower wishes - a small charge is made for doing so. The plans are:
Tenure - equal monthly payments as long as at least one borrower lives and continues to occupy the property as a principal residence.
Term - equal monthly payments for a fixed period of time.
Line of Credit - unscheduled payments or in installments, at any time and any amounts until the line of credit is exhausted - this option is not available in Texas.
Modified Tenure - combination of line of credit with monthly.
Modified Term - combination of line of credit with monthly payments for a fixed period of time.
Home Keeper Reverse Mortgage Loan
This program is administered by Fannie Mae and is similar in many ways to a HECM. However, the key differences are that more property types are eligible, the maximum amount that can be borrowed is higher, singles can borrow more though couples less and a line of credit does not grow, unlike a HECM.
Any broker who sells the Home Keeper program must also offer the HECM program. Both require that the borrower receive information and counseling from an independent third party.
Jumbo Reverse Mortgage Loan
These are proprietary programs set up and run by private companies. The biggest attraction of these schemes is that there is no maximum amount that can be borrowed; the limit is set by the value of the home. Owners of high-value homes who want to unlock as much cash as possible would be best accommodated by a jumbo reverse mortgage. However, the cost of these is higher, so a potential borrower should fully understand the charges involved.
The following are some of the larger programs currently being offered to seniors.
Financial Freedom was the first proprietary Jumbo Reverse Mortgage program and is called the Cash Account Advantage.
Wells Fargo does not have its own program buy is a Financial Freedom licensed broker.
Generation Mortgage offers a product called, Generation Plus.
Bank of America offers The Independence Plan.
Countrywide offers a product called Simple Equity.
BNY Mortgage/Everbank currently has two versions: the Prime Advantage Fixed Rate Reverse Mortgage and the Prime Advantage Adjustable Rate Mortgage.
When dealing with a broker, make sure you aren't 'up sold' a proprietary product when a HECM of Home Keeper reverse mortgage loan would suffice. If in doubt, seek further advice from another broker or your independent financial advisor.
The above is a brief overview; follow the links for more detailed information on a reverse mortgage loan and find out which would be best for you, whether it is a FHA reverse mortgage, Home Keeper reverse mortgage or jumbo reverse mortgage.