Reverse mortgage with a twist

HECM Saver sacrifices loan amount for lower upfront costs

The U.S. Department of Housing and Urban Development has announced a new reverse mortgage alternative aimed at cash-strapped seniors who are looking to reduce the upfront costs of tapping their home equity in exchange for lower loan proceeds.

The move comes on the heels of increases in the cost of mortgage insurance. Mortgage insurance is required on all reverse mortgages so that the lender is protected if the senior outlives the value of the home. It also it also protects the owner in the event the lender went out of business.

Both issues come into play in a down real estate market where many home are worth less than they were at the time the reverse mortgage was issued.