HECM Standard vs. HECM Saver
In 2010, the Department of Housing and Urban Development (HUD) introduced the HECM Saver Reverse Mortgage option for eligible seniors. The HECM Saver may be best for homeowners who would like to borrow a smaller amount than would be available with the HECM Standard Reverse Mortgage loan. In addition to protecting more of the equity in your home, the HECM Saver features a lower initial monthly Mortgage Insurance Premium (MIP).
For either HECM Reverse Mortgage option, specific requirements must be met. Borrowers must be 62 years of age or older and either own their home outright or have paid-down a considerable amount. The home must be the borrower’s primary residence and the borrower cannot be delinquent on any federal debt. Borrowers must also participate in a counseling session given by a HUD- approved HECM counselor.
Like all Reverse Mortgage Loan options, the HECM Saver and HECM Standard may help provide the financial freedom that lets you live the retirement you desire, pay off medical bills, make home improvements, or just free up some extra cash. The funds can be received in a lump sum payment, monthly payments, as a line of credit or a combination of these options. Homeowners stay in the comfort of their own home all without making monthly mortgage payments as long as the borrower continues to live in the home as their primary residence, continues to pay required property taxes and homeowners insurance and maintains the home according to Federal Housing Administration requirements. The proceeds are tax-free; however it is always best to consult your tax or financial professional.
There are differences to consider between HECM Standard and HECM Saver Reverse Mortgage loans. The chart below highlights the differences and each should be weighed carefully to determine which option fits your lifestyle and future plans.
|HECM Standard||HECM Saver|
|Initial MIP||2% of home value||0.01% of home value|
|Annual MIP||1.25% of outstanding loan balance||1.25% of outstanding loan balance|
|Maximum Amount to be Borrowed||Up to $625,500- Dependent upon borrower’s age, interest rate and the lesser of the home’s appraised value, sale price or maximum lending limit.||Generally 10%-18% less than what borrowers would receive under the HECM Standard. Dependent upon borrower’s age, interest rate and the lesser of the home’s appraised value, sale price or maximum lending limit.|