| FHA HECM | Fannie Mae Home Keeper Loans | Conventional Reverse Mortgages | |
|---|---|---|---|
| Maximum loan amount: | $362,790 | $417,000 | No set maximum |
| Fees: | Closing costs are capped by FHA, but HECM fees do include a premium (MIP) equal to 2 percent of the maximum lending amount or the value of the house, whichever is the lower, plus 0.5% each year of the outstanding balance, paid directly to FHA in exchange for guaranteeing the loan. | No Mortgage Insurance Premiums, but other typical closing costs like credit report fees and title insurance. | Each lending institution sets their own fees. |
| Interest Rates: | Monthly and annually adjustable interest rates tend to be lower than other reverse mortgage options | Interest rates for Home Keeper loans are significantly higher than for HECM loans, plus the only option is a monthly adjustable rate. | Typically much higher than HECM or Fannie Mae loans |
| Pro's: | The HECM is the most popular reverse mortgage because it's government-backed, with the lowest interest rates and closing costs. | The maximum lending limit of the Home Keeper is higher than the HECM ($417,000 vs. $362,790) and you don't have to pay for Mortgage Insurance. The homeowner can also use the proceeds to purchase another home. | There's no limit on what your parent can borrow. |
| Con's: | Lower maximum load amounts than either the Fannie Mae or conventional options | Higher interest rates, fewer interest rate options. Because there's no Mortgage Insurance Premium there's also not the same guarantee. | Interest rates are much higher, fewer regulations and protection in case the lender or loan servicer fails to make payments to your parent. |
| Bottom line: | The HECM is probably the safest choice with the longest track record of all the reverse mortgage options available, but check with your counselor or investment advisor to make sure it's the right choice for your parent. For most people, the HECM will be a better fit than the Fannie Mae Home Keeper, according to reverse mortgage experts. Still, for some individuals with higher property values, condominium owners, and seniors wishing to use a reverse mortgage to purchase a new home, the Home Keeper is worth checking out. For most situations, either the HECM or Fannie Mae Home Keeper is a safer and better choice. |
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