A California Reverse Mortgage That Costs Less

A California reverse mortgage can be used by homeowners 62 or older that own their homes free and clear or have only a small mortgage balance. The HECM (Home Equity Conversion Mortgage) is a unique home equity loan designed specifically for older homeowners. It allows senior citizens to extract cash from the equity in their homes, without having to make payments on the loan as long as they live in the property.

However, there has always been one really big negative argument hoisted at this product from not only opponents, but borrowers themselves. That negative argument was that a California reverse mortgage was too expensive. The closing costs easily averaged approximately 5% of the loan amount or value of the home. Roughly equivalent to the cost of selling a home in California.

Although the high costs are relatively easy to justify, there is still no argument that they are expensive loans, compared to a regular home mortgage loan.

Enter, the HECM Saver. HUD rolled out a lower cost version of the popular HECM Standard, which they call the HECM Saver. The HECM Saver is now one of the FHA California reverse mortgage offerings and is also available nationwide. The HECM Saver drastically reduces the up-front FHA insurance premium cost. In fact, it brings it to 0.01% of the appraised value of the home, or virtually zero. The HECM Standard is a full 2% of the appraised value. As you can see...a huge difference.

There is a trade-off for the lower closing costs though. The HECM Saver not only reduces the upfront insurance premium to almost zero, but it also offers less money to the borrowers. The loan amounts are reduced from about 15 to 20%. So if the borrower is trying to payoff an existing mortgage balance, they may not have the option of using the HECM Saver if it does not provide enough money to completely payoff their current mortgage balance..

As a result of declining home values throughout the state of California, not all borrowers will have the option of choosing the HECM Saver. But if you do, it is absolutely worth checking into.

Check out thisCalifornia Reverse Mortgage information and request your personalizedFree Reverse Mortgage Quote Today!