Reverse mortgages are a common money-raiser for senior-citizen homeowners. Unfortunately the high fees associated with reverse mortgages often make them a poor choice. But a new program from the Federal Housing Administration called the Home Equity Conversion Mortgage Saver (HECM Saver) helps lower some of the costs associated with reverse mortgages.The HECM Saver program lowers the insurance premium required at closing of a reverse mortgage from 2.0 percent to 0.01 percent. However, it also lowers the amount that can be borrowed with the standard HECM program by 10 to 18 percent.
Reverse mortgages are essentially the opposite of standard mortgages: They pay out the equity of a property in cash to be used for expenses such as home improvements or health care while also paying off the mortgage. Reverse mortgage holders have no monthly payments. The interest and other fees become due only when the owners pass away or sell the home.
One top consumer group recommends home-equity loans before reverse mortgages, primarily because of the high fees and closing costs associated with them.
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