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Mortgage Insurance

Mortgage Insurance

Mortgage Insurance Premium (M.I.P.)

What is it and why do I have to pay it??

If you obtain a HUF/FHA Insured Reverse Mortgage (H.E.C.M.) you will pay a Mortgage Insurance Premium to H.U.D. equal to the lesser of 2.00% of the appraised value of your property or the maximum HUD/FHA Loan amount in your County, whichever is less.

In addition at the up-front premium you also pay a 1/2% annual premium to HUD/FHA on the outstanding Principal Balance of your Reverse Mortgage.

What do you get for the money you are spending??

1. HUD/FHA insures your Reverse Mortgage Benefit. No matter what happens to the value of your home and no matter how long you live your Benefit is guaranteed to be paid by an agency of the US Government.
   
2. You also get better loan terms than would be available without the HUD/FHA guarantee. The current interest rate is 1 Year Treasury plus 1.50%.
   That is substantially below the rate offered on the "Conventional" Reverse Mortgages.
   
3. The "non-recourse" provision of your Reverse Mortgage is important. This provision insures you that your heirs will never be liable for any amount owing on your reverse mortgage once you have passed on. No matter how long you live, no matter how much you owe, whether your home value goes up or goes down, HUD/FHA agree to accept title to your property in full satisfaction of your Reverse Mortgage. The remainder of your estate will pass to your heirs without regard for the Reverse Mortgage.
   
4. Without the HUD/FHA Insurance there probably would be no Reverse Mortgage Program available. If there was it would likely be so restrictive in its terms that few seniors would qualify. I know it is irksome to fork over that much money to the Government but the HUD/FHA Mortgage Insurance is what makes the program viable to the Institutions that offer Reverse Mortgages.
   
5. There are alternative Reverse Mortgages that do not have the HUD/FHA Insurance. We suggest that you compare the potential benefit available from these programs before settling on the HUD/FHA version. If the available Benefits from one of these programs is adequate you could save a substantial amount in closing costs.