Choosing Between Standard and Saver HECMs

On forward mortgages, borrowers have long had the option of selecting from multiple combinations of interest rate and points. Borrowers who expect to have their mortgage a long time and have the cash to pay upfront charges can select a low-rate/high point combination. Borrowers with a short horizon and short on cash can select a high-rate/negative point (rebate) combination.

The Saver provides a similar option for HECM borrowers with short time horizons who don’t want to use up all their equity in the house. The initial mortgage insurance premium is reduced from 2% of home value to 0.1%, while the maximum amount that can be drawn is reduced by 15-20%, depending on the borrower’s age. The Saver is a useful option for owners who intend to sell their home in a year or two and pay off the HECM with the proceeds. The standard HECM should be select ed by owners who expect to remain in their homes indefinitely and want to extract as much from it as possible.

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