Is the HECM Saver Reverse Mortgage the Right Choice?

Right now, a brand new loan product is getting a lot of attention.. It is called the HECM Saver Reverse Mortgage. It offers plenty of savings over other products. But are the savings your best option?

Traditional or standard reverse mortgages have a fee known as upfront mortgage insurance. With an appraised value of $625,000 or less, it is 2% of the value of your home but never in excess of $12,500. Though typically financed into the loan, this fee was previously required on all FHA Reverse Mortgages though not anymore.

The HECM Saver reverse mortgage is a way to get away from paying this fee. The upfront mortgage insurance fee can be avoided for an interest rate that is just a bit higher, approximately 0.25%. This will likely save you as much as several thousand dollars, based on what your home appraises for.

Now that you know the advantages of the HECM Saver, we'll take a look at the drawbacks.

The HECM Saver will provide much less money than standard Reverse Mortgage programs. Considering a $200,000 home, it may be as much as $20,000. The reduction in fees could possibly be around $4000, but the money you would get is quite a bit less than with a Standard Reverse Mortgage. You'll have to weigh these figures and then determine if it is a good idea for you. When you need all the money to pay off your mortgage or any other debts, you may not even be able to use this loan option.

The person that benefits the most from this HECM Saver reverse mortgage is the one who doesn’t want all the money that's available to them. This individual is commonly one who doesn't owe a lot on their home or owes nothing at all.

If they were to do a fixed rate loan on a home which they owed nothing on, and it was valued at $350,000, the home owner would have to take at closing, about $200,000 or maybe more, depending on their age. That is a large amount of money to have around if you do not need it. Considering they only want $75,000, considering the HECM Saver would reduce the fees $7,000, and because they didn’t want the "extra" money, you don't have a reason to pay the fees on the larger sized loan.

The idea of this article is to show you that there are actually two different types of the reverse mortgage. Neither one is right for everyone. With any luck, knowing there are actually options just might help you ask the proper questions of your loan officer and counselor, allowing you to make the right decision on which loan is right for you.