MIP is an acronym for Mortgage Insurance Premium. It is the cost of the insurance policy that is purchased at the time of funding an FHA (another acronym) loan. MIP is charged in both forward and reverse FHA loans.
Purpose of MIP
Traditionally this insurance protects the lender against a loss on the loan if the home is foreclosed on and unable to sell for the balance owed. It is all of that and has an additional function in the reverse space. That function is in the event the lender is unable to fulfill it’s obligations to the borrower, FHA can and will step in to fulfill them. For example, if the bank is unable to make the monthly payment to the senior because a natural disaster shut down their servicing center - FHA will step in and make that payment.
In a HECM reverse mortgage MIP protects the lender and the borrower!
Upfront Cost of MIP
2% of the appraised home value or FHA Lending Limit (whichever is less) on a HECM Standard reverse mortgage, ($6,000 on a $300,000 home)
.01% of the appraised home value or FHA Lending Limit (whichever is less) on a HECM Saver reverse mortgage, ($30 on a $300,000 home)
Ongoing Cost of MIP
An annual premium of 1.25% of the current outstanding loan balance paid monthly.Mortgage Insurance makes any loan less risky.
Less Risk = Lower Rates
Higher Risk = High rates.
That's why FHA loans have competitive rates even with a negatively amortizing loan like a reverse, or a low down payment program like the traditional FHA Mortgage. That is also why investors will purchase FHA loans - they are protected against loss.
Bend, Oregon: CE Credits for Realtors delivered in Oregon on the topic of Reverse Mortgage
Sharon Falvey, Vice President Northwest Sales has been effectively delivering Continuing Education Credits to Realtors accross the State of Oregon and most recently in Bend, Oregon. This class has been very well received by Realtors that thought they understood the truth about Reverse Mortgage until they took the class.
Sharon Falvey and Security One Lending were recently quoted in "Reverse Mortgage Daily" and "Reverse Fortunes" as well as other's. It brings me great joy to be able to dispel the myths about Reverse Mortgage and show Realtors how they can position themselves to use it correctly and increase their sales. We all need to make our way in these interesting times and you can never have to many tools in your belt to do so.
Dan Heater: Continuing Education Director in Bend Oregon for COAR is quoted as saying:
"Thank you Sharon so much for the great class on Reverse Mortgages you did at COAR last week. The class was very good. It is amazing that we all still have these pre-conceived ideas about what a reverse mortgage is and how it can fit into our lives as we age. All of our brokers we very impressed with the class and had all changed their minds as to the value and use of reverse mortgages both personally, and as a tool to help their customers.
The class was concise, easy to understand and gave all who attended something else to include in their presentations for their clients. I would recommend this class for anyone to take. Anyone approaching this age, with parents close to this age, or a real estate practitioner with clients of this age would gain valuable information as to how to own real estate as you approach your senior years.
And Desiree Streeter, Broker in Bend Oregon as saying:
I want to thank you so much for drawing my card for the nice briefcase. That really brightened my day! I have had some really rough times lately with caring for my mother who has been ill for the past 2 years and then my husband being in the hospital since Feb 2 and getting out tomorrow. With that and work I have definitely had a full plate!
I really enjoyed the class today. I went into it knowing nothing at all about Reverse Mortgages. It was very interesting and I gained a lot of knowledge which I will use. I will highly recommend this class to others I know when I see it posted again. I look forward to your updates!
Real Estate Broker
If you would like more informaiton as to how I can bring this to your Association or Office please do not hesitate to contact me. For more general information please visit my website or call me direct at 541-891-5706 (cell) 503-534-3546 (office). I look forward to serving your needs.
Vice President, Northwest Sales
Home Equity Specialist
My blog is a personal expression of my own thoughts, and opinions and does not necessarily reflect the thoughts and opinions of Security One Lending