With more and more products being released everyday, IBIS has published a calculator showing the different reverse mortgage options that are available in the marketplace.
According to calculations from IBIS, a 73-year old borrower in a $250,000 home gained $4,803 in initial benefits by having no service fees. Then they gained an additional $4,500 by having no origination fee. That’s a $9,303 increase in benefits in a couple of weeks. But with a fixed-rate HECM, borrowers must take all of their benefits out as upfront cash.
“The extra money they have to withdraw versus an adjustable-rate reveres mortgage costs them 6.231% per year (5.56% plus MIP compounded monthly),” said Jerry Wagner, President of IBIS in an email to RMD.
He added that PenFed is now displaying an annual adjustable rate HECM with no service and origination fees. The loan is a Treasury-based HECM with a 2.50% margin. “On first glance, this sounds like the dream product, but its available cash is considerably less than a LIBOR-based HECM with a 1.75% margin and full fees (and also less than the full-fee fixed HECM),” said Wagner.
It’s main benefits are not having to take all the cash upfront and having no origination fee. Lower upfront costs will be attractive to those who don’t know how long they may stay in their home and it has a materially lower lifetime rate cap than a monthly-adjusting HECM.
IBIS said it will be updating the new tool as products are released so people can run their own scenarios. Companies can also license the tool to show specific lenders products. You can see it in action here.