A Reverse Mortgage loan is a home loan that allows eligible homeowners to convert a portion of the equity in their home into cash. Reverse Mortgage loan borrowers do not have to repay the HECM loan until all borrowers on title no longer live in the home as their principal residence or fail to meet the obligations of the mortgage, including paying property taxes and insurance.
The Federal Housing Administration created the HECM (Home Equity Conversion Mortgage) Saver in 2010 for seniors who are planning to borrow fewer funds than those who obtain a Home Equity Conversion Mortgage Standard. Like other Reverse Mortgage options, the HECM Saver allows seniors the opportunity to tap into the equity in their home to pay for home repairs, medical expenses, to live their retirement dream and so much more.
The HECM Saver has an upfront premium of only 0.01 percent of the home’s property value and the Monthly Insurance Premium (MIP) has an annual rate of 1.25% of the outstanding loan balance. The amount of equity you can access with the HECM Saver is less than with a HECM Standard, thus protecting the equity in your home.
Borrowers will have the option to receive funds in a lump sum, line of credit, monthly payments, or in a combination of these options. The proceeds are tax-free; however it is always best to consult a financial professional. In addition, provided the home is sold to repay the loan, borrowers’ heirs will not be personally liable if the loan balance exceeds the value of the home.