In October 2010 the Federal Housing Administration launched a new reverse mortgage called the HECM saver. In exchange for the borrowing taking a lower loan amount, the HECM Saver charges drastically lower up front fees. HECM is short for Home Equity Conversation Mortgage, the reverse mortgage program insured by the FHA. The vast majority of reverse mortgages are HECMs.
The HECM Saver effectively eliminates the upfront mortgage insurance premium, charges just 0.01 percent of the home value, compared to 2.00 percent for a standard HECM. On a $400,000 home, that means you’ll pay an upfront fee of just $40 a savings of $7,960. The tradeoff is the amount you can receive from your home is 10-18% less under the Saver program, depending on your age. This can be a good deal for someone with plenty of equity in their home and not needing the full loan amount available under a standard HECM.
The HECM Saver product in all aspects other than loan size has the same features of a HECM product, including fixed or variable interest rates and the flexibility of obtaining the cash in either monthly or lump sum payments.