April 2008
Larger loans are available
For homeowners whose equity exceeds the FHA's mortgage limits, Fannie Mae offers the Home Keeper reverse mortgage, which tops
out at $417,000. The monthly adjustable Home Keeper differs from HECM in several critical ways. It is linked to a weekly average
of one-month CD rates, which was 4.4 percent in January 2008. And the margins on these loans can be as high as 3.4 percent—in
all a pricey deal. Moreover, the lifetime interest-rate cap on Home Keeper is 12 percent, and untouched balances do not appreciate.
But you can use Home Keeper proceeds to purchase a more expensive home. For example, suppose a 75-year-old man sells his home in the Rust Belt for $200,000 and wants to buy a condo in Florida for $250,000. To avoid a mortgage, which at his age would be difficult to obtain or pay back, he could buy the property with his cash on hand and a $50,000 Home Keeper reverse mortgage on the condo.
Most reverse-mortgage companies that offer HUD and Fannie Mae products also offer proprietary jumbo loans for people with homes worth more than $417,000. Freed from federal-agency limitations, jumbo reverse mortgages are the go-go face of the business, with fixed-rate, monthly, and semi-annual adjustable programs, some with introductory discounts on rates and fees. These loans are linked to the pricier LIBOR indexes and generally carry margins of more than 3 percent.
But you can use Home Keeper proceeds to purchase a more expensive home. For example, suppose a 75-year-old man sells his home in the Rust Belt for $200,000 and wants to buy a condo in Florida for $250,000. To avoid a mortgage, which at his age would be difficult to obtain or pay back, he could buy the property with his cash on hand and a $50,000 Home Keeper reverse mortgage on the condo.
Most reverse-mortgage companies that offer HUD and Fannie Mae products also offer proprietary jumbo loans for people with homes worth more than $417,000. Freed from federal-agency limitations, jumbo reverse mortgages are the go-go face of the business, with fixed-rate, monthly, and semi-annual adjustable programs, some with introductory discounts on rates and fees. These loans are linked to the pricier LIBOR indexes and generally carry margins of more than 3 percent.
