Reverse Mortgage Loan Blog

There are 3 types of reverse mortgage programs. Each shares similar benefits, such as being insured, unlocking the equity in your home and paying you for as long as you live in your home. However, it’s their differences that will decide which is best for you.

Before getting detailed information about reverse mortgages you should be familiar with the main programs that are currently being offered. Of the first two, HECM and Home Keeper, the plans don’t vary from broker to broker. However, with the third program, often referred to as proprietary or jumbo reverse mortgages you do have some options that will require you to think carefully before deciding if they are right for you. Let’s take a look at each program at what it offers.

However, before doing so, let’s have a look at the common points pertinent to all programs. Firstly, only seniors who are 62 or over can apply. The borrower must own outright or have very little debt remaining on their home. Unlike a home equity loan, there are no monthly repayments; instead, the lender gives the borrower an agreed amount - usually as monthly payments - for as long as the borrower lives in their home. The borrower’s Social Security and Medicare payments are not affected. The title deeds remain in the homeowners hands; the lender never has them. The home and other assets can be passed on to heirs - the heirs of the estate will need to pay back the loan but can do so however they like: they do not have to sell the home unless they want to.

HECM Reverse Mortgage

You may also have heard of this type of loan being referred to as a FHA or HUD reverse mortgage. All 3 are the same product. HECM is an acronym for Home Equity Conversion Mortgages. These were introduced by the US government in 1989 and are administered by the U.S. Department of Housing and Urban Development (HUD). The major point about this loan is that they are backed and insured by the government through the Federal Housing Administration (FHA) insurance program.

Over 90% of reverse mortgages are HECM. The program is simple enough for most to understand; has the lowest borrower costs; and many seniors are reassured that the program is guaranteed by the government - the borrower will always receive the money they’re entitled to, no matter what.

The key points of the program are;

The amount that can be borrowed is calculated using the equity in the home, its location, current interest rates and the homeowner(s) age. There is a maximum limit that can be borrowed; depending on the factors just mentioned, it can be between $200,160 and $362,790.

Payments can usually be received in 5 ways: Indefinite monthly payments; monthly payments over a predetermined number of months; as a fixed line of credit until the line of credit is exhausted; a mixture of both type of monthly payments and line of credit. Note: lines of credit are not allowed in Texas.

Home Keeper Reverse Mortgage

This program is administered by Fannie Mae. It varies from the HECM program in that couples don’t receive as much as they would with a HECM - individuals do better with a Fannie Mae. There’s more flexibility on the type of home that qualifies. The maximum limit is higher at around $417,000.

Proprietary Reverse Mortgage

These are administered by private companies and can make available loans of much larger amounts as there are no maximum limits, though the set up and closing costs are more expensive than with either the HECM of Home Keeper programs. These programs are really for those who own high-value homes. Another consideration is the method of payment. There are no monthly payments; the borrower either receives a lump sum or has a line of credit.

There are several companies and type on offer; some now offer fix rates as well as the usually floating interest rates.

The following companies offer various programs.

Financial Freedom was the first proprietary Jumbo Reverse Mortgage program - Cash Account Advantage.

Wells Fargo doesn’t have its own program thought it is licensed to broker the Cash Account Advantage program.

Generation Mortgage offers a jumbo Reverse Mortgage product called Generation Plus.

Countrywide has a program called Simple Equity.

BNY offers two versions; the Prime Advantage Fixed Rate Reverse Mortgage and the Prime Advantage Adjustable Rate Mortgage.

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