Does Less Fees, mean Less Money?
(The Benefits of the HECM Saver)
Reverse Mortgages are a possible tool for senior who wish to live comfortably during retirement. Unless it has been used as a last resort, however, senior homeowners have been largely skeptical of the reverse mortgage, choosing to exclude it in their retirement plans because of the high costs associated with it.
In 2010, the “Standby” Reverse Mortgage was introduced as a cost effective alternative to seniors hoping to obtain a reverse mortgage. The benefits of a HECM Saver include:
- Lower Up-Front Costs. Firstly, amount of equity that can be borrowed with a “Standby” Reverse Mortgage is about 10-18% less than with a Standard Reverse Mortgage. As an added benefit, the up-front fees on the Mortgage Insurance Premium--which ensures that the borrower doesn’t have to pay more than the value of their home—decreases from 2% to 0.01% (which is over $12,000 savings on the max value of $625,500).
- A non-cancellable line of credit. As opposed to a Home Equity Line of Credit—which requires minimum payments and runs the possibility of being frozen, canceled or reduced (like in the 2007-2009 recession)—the HECM Saver line of credit cannot be canceled. Also, the line of credit grows independent of the home value, at the same interest rate that would accumulate on an outstanding loan balance, unlike the HELOC that grows proportionally to the home value, if at all.
- Borrower's control over, if and when, they use the line of credit. The volatility of the economy ensures that more cash flow will be needed to maintain your standard of living and less cash flow during other times. The HECM Saver allows you to use the line of credit when you deem it necessary; you decide when you want to increase or decrease your cash flow.
- The income received from the reverse mortgage is tax-free, and the interest, when paid, may be tax-deductible. The borrower does not accumulate interest on the unused portion of the line of credit. Borrowers who do not immediately use their line of credit do not have to pay interest as long as the line of credit remains unused.
- A line of credit that can be paid back at any time without a penalty.
Interested in a "Standby" Reverse Mortgage? PS Financial Services is a reverse mortgage specialist dedicated to finding the best lender for each senior homeowner. Give us a call at (888)845-6630 to determine if a reverse mortgage is right for you.