The Home Equity Conversion Mortgage (HECM) program is a unique hybrid of the public and private sectors, with a great deal of interest directed toward the Federal Housing Administration (FHA) and the Department of Housing and Urban Development (HUD) who set the policies by which that program operates.
After my recent overview of potential uses for a reverse mortgage, I want to go deeper on each item. The first set of options for a reverse mortgage uses the available credit more quickly, either to pay off an existing mortgage or to purchase a new home. With these strategies, it is possible to look at using outside resources to avoid borrowing more than 60% of the initial principal limit during the first year of the loan. Using outside sources could mean the difference between paying a 0.5% initial mortgage insurance premium, and a 2.5% premium. For a $500,000 home, that difference means $10,000 of additional costs for exceeding the limit.