HUD Reverse Mortgage

There are several types of HECM loans, also known as FHA reverse Mortgages. The programs listed below are the most common but there are occasionally some changes in the market that will add or remove reverse mortgage programs. Simply defined: it is a government insured loan that allows you to use the equity in your home without needing to sell it and without having to make payments.

FHA Reverse Mortgages

1. HECM FIXED
This is the loan that seems to generate the most interest, is the fixed reverse mortgage loan.  It got a lot of people over their fear of a reverse mortgage. Prior to late 2008, the only option was the adjustable rate. The only way to see what the rate is, is to ask a lender.  You can see the fixed rate for a reverse mortgage on our web site.  This rate changes daily, and can not be advance locked.  This rate floats until you get loan documents to sign.  Then it is fixed for the life of the loan.
    
There is a small downfall to the HECM FIXED programs.  It is that all money must be taken up front.  Where the adjustable programs allow for a Line of Credit or a monthly income, the fixed must be taken as a lump sum.  This is not a bad thing, but you should be aware of it.

2. HECM LIBOR
Currently the programs available on the LIBOR products are:
    1. HECM LIBOR 150
    2. HECM LIBOR 175
    3. HECM LIBOR 200
    4. HECM LIBOR 275 and higher.

The numbers after the word LIBOR are reflecting the margin associated with the loan.  For example, to calculate the interest rate on a LIBOR 200, you could look at the 6 month LIBOR rate on a financial site like Bloomberg or MSN and add 2.00% to it.  This will give you your interest rate. All LIBOR reverse mortgages are adjustable.

3. HECM CMT
CMT products are not such a good option right now, but there are some lenders still offering them. The most current CMT reverse mortgage products were:
    1. HECM CMT 375
    2. HECM CMT 400
    3. HECM CMT 425

But since they aren't as good of a deal, there are few (if any) lenders offering them.

As stated above the number part (of the program name) is the margin tied to the loan.  This time though, we will look up the 1 YR Treasury and add the margin to it. All CMT reverse mortgages are adjustable.

Proprietary Loans

4. JUMBO REVERSE.
We do have a jumbo reverse mortgage . It is new on the market. With the new HECM limits at $625,000, the jumbo really starts to benefit you when the value of the home is 1.5 million or more. If your home is somewhere between the HECM limit and where the jumbo benefits you, call us. We may have a solution.

FIXED RATE OR NOT?

Which program makes the most sense for you? There are a few facts needed to making your decision. The fixed interest rate requires you to take all the money at the time you close your loan. Here are some reasons to take the money up front.
1. You have a mortgage that needs to be paid off that will consume most of the funds you are going to receive.
2. You have a need for a large sum of money that consumes most of the funds. Examples would be if you are doing repairs or a remodel.
3. You are purchasing another home or a car or motorhome.
The idea is, if you have a place to put (or spend) the money, it won't be a burden to have it "sitting around". Keep in mind that your are accruing interest once you draw the money.

So, if you don't need it now, maybe you should consider the other options.

A lot of people are a little afraid of the ARM (Adjustable Rate Mortgage), but it does offer some nice advantages with ways to receive funds that is not available for the fixed rate product.
1. Does it make more sense to have a monthly income or a line of credit to draw on when the funds are needed.
2. Do you need monthly income? One of the options is to have an annuity style income that continues for the rest of your life.
3. Would you like to have a reserve account you can draw on if needed? If there was a repair needed on your home, or your car needs major work.

The best part about the adjustable products is that you are not accruing interest when you don't use the money. It only starts costing you when the money is drawn or used.

Here is another great feature of a reverse mortgage. You can combine any of the methods above and make a custom loan program for you. Get a lump sum to take care of urgent business, have a line of credit for just-in-case situations and a monthly income to help the cost of living be more affordable. Of course your age and equity will help us determine the amount available to you

If you would like help customizing a plan for your reverse mortgage, give us a call help you build the best possible plan for you.

Request your free reverse mortgage information to see how a reverse mortgage would have the greatest impact on your retirement.