Home Equity Conversion Mortgages (HECMs) insured by FHA
FHA requires a Mortgage Insurance Premium (IMIP) to be collected at closing. It is 2% of the appraised value of the home. In addition, there is a 0.5% annual mortgage insurance premium based on the loan balance.
This insurance provides the following protections and peace of mind for borrowers and their children:
The insurance guarantees that you will never owe more than the home is worth and that your heirs will not inherit any debt. In addition, it guarantees that your line of credit will continue to grow and compound annually no matter the value of your home or changes to the stock market. In the unlikely event that your lender is unable to continue to make payments to you, FHA will step in so you can count on that income being there for the rest of your life, or the agreed upon term. And FHA guarantees that you may live in the home for the rest of your life as long as you pay your property taxes, homeowner’s insurance, HOA if there is one, and maintain the home.
Proprietary and Jumbo Reverse Mortgages
A Proprietary Reverse Mortgage is a product that is offered with a variety of options. Homeowners as young as 60 may participate and properties may be into the several millions in value allowing homeowners to access as much as $4 million dollars in loan proceeds.
The costs are far less for a Proprietary Reverse because there is no mortgage insurance as there is on the traditional HECM (Home Equity Conversion Mortgage). In addition, the value of the home can far exceed the HECM’s lending limit of $1,089,300.
There are options for just receiving cash at closing, as well as options allowing for a growing line of credit that cannot be cancelled or called due like a HELOC. This is very helpful in uncertain times.