reverse loan costs
Okay, what does “HECM” 4 Purchase mean? Is is some sort of mysterious formula for investing or making money? The general public is unfamiliar with this term as are most Realtors.
So what does it mean and why is it something that could be very useful and advantageous for a senior to know about? Its a type of mortgage that they can use to purchase a home or even a second home such as a vacation property.
And how would they do this?
Buy using funds from a reverse loan. As long as the borrowers are aged 62 or older and they have funds that could be used for a down payment on an a new property, they could possibly relocate to an area they have always wanted to live in or buy their dream home.
If you want to know more about this special loan program, please contact me for details and or I can provide you with information that is designed especially for you and your dream.
Within the last year newer and more affordable reverse loans have been created that allow the borrower more access to the equity in their home if it’s value exceeds 1MM. And these loans are without origination fees or the FHA MIP insurance, plus the homeowner can borrow up to 4 MM.
Fees or “costs” for a reverse mortgage are identical to what the fees are for traditional real estate loans, with a couple of exceptions and I’m going to discuss one of those exceptions in this post.
I discussed this topic previously, but I thought that I would go into more detail about the IMIP that is always charged on FHA loans and just what it is, because it is the most expensive but important fee that is charged on all reverse mortgages.
Reverse loans never have a required mortgage payment and there is no loan term to be concerned about, but the interest that is owed each month on it will compound over the life of the loan and one of the important purposes of the Initial Mortgage Insurance Premium / IMIP is to guarantee that no matter how much is owed when the loan becomes due ( the death of the last borrower and or the estate selling the home), they can never owe more than the present value of the property.
In other words, if the loan is larger than what the property is worth, the IMIP will pay the difference, not the borrower or their heirs. They are completely protected and not liable for the repayment of any funds that exceed the current value of the property.
This is referred to as a “Non-Recourse” mortgage.