The Mortgage Planners have been working with seniors and Reverse Mortgages in San Diego and throughout California for the past 8 years. As a San Diego Mortgage Broker and banker we have several Reverse Mortgage sources to make sure the borrower has the best options. Below is an overview of all the different types of Reverse Mortgages.
HECM – Home Equity Conversion Mortgage – San Diego
HECM refers to a reverse mortgage insured by HUD and FHA. All of the reverse mortgages issued in 2009 and 99% of all volume in 2008 were HECMs. The FHA’s HECM program contains special requirements like HUD counseling and a property value ceiling. The HECM property value ceiling is currently at $625K for San Diego County. This means that if the home is appraised for more, the loan amount will be based on the $625K value.
There are currently three different types of HECM reverse mortgages offered in San Diego and nationally. Each offers either a fixed rate option or an adjustable option. The three programs along with the differences between the fixed and adjustable options are explained in more detail below.
Fixed Rate Reverse Mortgage – San Diego
The fixed rate HECM Reverse Mortgage eliminates the risk of adjustable-rate mortgages. With the HECM Fixed Rate loan, the borrower has the comfort of knowing exactly what their interest rate will be for the life of the loan and the certainty that the rate will never increase. In addition, since the interest accrual is known, borrowers will have the comfort of knowing exactly how much they may pass on to their estate. Borrowers must take a full draw at closing.
Adjustable Rate Reverse Mortgage – San Diego
Adjustable rate reverse mortgages have by far been the most popular reverse mortgage loan to date. They are based off of two indices; Treasury Index (CMT) and LIBOR Index. The adjustable option allows the funds available to be paid out as a lump sum, line of credit, tenure payment, or any combination.
HECM Saver Reverse Mortgage – San Diego
With the newly introduced HECM Saver Reverse Mortgage, the up-front mortgage insurance premium required by the Federal Housing Administration (FHA) is significantly reduced as compared to a HECM Standard Reverse Mortgage. As a result, you could save thousands of dollars, depending on your home’s value. While the maximum amount of money you can borrow is less than with a HECM Standard, lower costs may make it an attractive option for those seniors in San Diego looking for a Reverse Mortgage
HECM Standard Reverse Mortgage – San Diego
The HECM Standard Reverse Mortgage, on the other hand, may be more desirable for those who need the most money available to them. This reverse mortgage allows the client to borrow an amount that is greater than with a HECM Saver. The up-front costs are higher with a HECM Standard Reverse Mortgage because the full up front mortgage insurance premium is paid.
Compare HECM Saver to HECM Standard
FHA designed the HECM Saver Reverse Mortgage as an alternative to the HECM Standard Reverse Mortgage for the purpose of lowering loan closing costs and providing an alternative to a Home Equity Line of Credit (HELOC). The program is designed for those who would like to borrow a smaller amount than what is currently available with the HECM Standard Reverse Mortgage. The HECM Saver Reverse Mortgage features a lower initial Mortgage Insurance Premium (MIP) of .01% of the loan amount, where the HECM Standard Reverse Mortgage requires a 2.0% MIP.
The amount of equity you can access with the HECM Saver Reverse Mortgage is less than with the HECM Standard Reverse Mortgage. For example, if a 74 year old San Diego homeowner using the HECM Standard Reverse Mortgage initially accesses 68.9% of their home equity, then the same homeowner using the HECM Saver Reverse Mortgage can only draw out 52.9%. Since the initial loan balance is significantly smaller, using the HECM Saver Reverse Mortgage can leave you with more equity in your home. Alternately, the HECM Standard Reverse Mortgage can allow you to access more equity.
Purchase Reverse Mortgage – San Diego
Beginning January 1, 2009, FHA began insuring reverse mortgage loans for Seniors to purchase homes. This program will allow Seniors to leverage their cash and buy their San Diego retirement home. A reverse mortgage does not have required monthly mortgage payments like traditional mortgages and reverse mortgages are based on appraised value and the borrower’s age, not credit or income. The older you are, the more you will qualify for.
Reverse Mortgage Refinance – San Diego
A reverse mortgage can also be used to refinance an already established reverse mortgage in the future. As the property value increases and the borrower gets older, there is a potential that more funds will be available. An adjustable rate reverse mortgage can also be refinanced in a fixed rate reverse mortgage.