September 10th, 2010 12:41 PM by Juan Luis Rodriguez-Kohly
The "Reverse Mortgage Daily" eNewsletter reports that in October 2010, FHA would unveil the new "HECM Saver" which will have a much lower upfront cost to the Borrowers.
Now, like they say "a tit for a tat". This lower cost does bring some changes, some good for some folks, some not so good for others.
1) The upfront Mortgage Insurance Premium (MIP) that FHA charges at closing, ould be reduced from 2% of the home value to 0.01%. Yayyy! You get more money. This is terrific news!!!!!
For those of you who do not know what the Mortgage Insurance is: FHA insures the Loan so that IF the value of the home at maturity of the loan, were lower than the debt owed to the Lender, FHA MI would (simply put) pay the Lender the difference, so the Lender does not lose any money. It also insures that if the Lender goes "under" and you have funds available in a Creditline, you will not loose them. Basically FHA takes over the loan and all the Obligations.
It is a great instrument as Lenders are willing to give a better interest rate with it.
Wait, I have not finished. Now for the "tat"
2) It is expected that the new "HECM Saver" will provide between 11-23% LESS funds at closing. It will be offered both in a Fixed Rate and Adjustable rate Plan.
This could be benficial as the less money you receive in proportion to the value of the home, the more equity you have. This might be perfect to many folks who want to save.
Now, all we have to do is wait to see the final product which should be comming out soon.
Well many folks have not obtained a Reverse Mortgage because of the high upfront costs. This will be a great opportunity to use some of that idle equity in your home and improve your income. Other could pay off the current mortgage, travel, etc...
I have a Reverse Mortgage in my home, so I can vouch for the great effect it has had in my life. I have also been witness to how it has helped many of my clients live a more independent life style.
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