It’s been almost a year since the HECM Saver came on the reverse mortgage market so I thought it was appropriate to write about my experiences with this program. The HECM Saver is designed for senior borrowers who want to reduce the up front fees and in exchange take a lower line of credit, lump sum or monthly payments. The up front mortgage insurance is reduced to .01% of the home value or maximum claim amount which is a drastic reduction from the standard 2.0%. On a home valued at $600,000, the MIP goes from $12,000 to $60. The amount of money available to the borrower is reduced to approximately 10% to 18% from the HECM Standard option.
It’s taken a while to catch on, but I’m noticing more people interested in the saver option lately. A reason it is becoming more popular could be because of the lower rates available now. A few months ago, fixed rates for the lump sum option and variable rates for the line of credit or monthly payment option, were a ½ point to ¾ point higher than the standard option. Currently, we offer the HECM Fixed Saver at 5.06%% and the ARM Saver at a 2.75% margin.Currently there is no servicing fee with these options. Just like the standard option, the available line of credit increases at the same rate that’s charged on the loan balance. If you think about it, this is a good way to secure your equity from further drops in home value. Some of my clients have secured a line of credit and not used it. Because they took it out when values were high, they now have a credit line availability actually higher than their home values of which they have full access!
The HECM Saver seems to suit people who want to preserve their equity but also provide a financial cushion for themselves. Many pay off mortgages and get rid of mortgage payments forever. So now, when you hear someone say, “Don’t get a reverse mortgage, the fees are too high” you can tell them to get educated before they spout off! The HECM Saver is an excellent alternative to standard Home Equity Lines of Credit.