Reading Your Benefit Comparison
The Benefit Comparison is one of the most important documents you'll review when considering a reverse mortgage. It provides a side-by-side comparison of different HECM options tailored to your specific situation. Here's how to read and understand every section.
Borrower Information
The top of the document shows your basic information: name, age, property address, estimated home value, and any existing mortgage balance. Verify this information is accurate, as errors could affect the calculations throughout the document.
Program Options
The comparison typically shows multiple options side by side — for example, a fixed-rate HECM and one or more adjustable-rate options. Each column represents a different loan configuration with its own interest rate, margin, and available proceeds.
Principal Limit
This is the gross amount you can borrow, determined by your age, the expected interest rate, and the maximum claim amount. It's the starting point before any deductions for closing costs or mandatory obligations.
Closing Costs Breakdown
The document itemizes all closing costs: origination fee, initial mortgage insurance premium, appraisal fee, title insurance, recording fees, and other third-party costs. These are subtracted from your principal limit to arrive at your net available proceeds.
Mandatory Obligations
Any existing mortgage balance, liens, or required repairs are listed as mandatory obligations. These must be paid from your HECM proceeds at closing before any remaining funds are available to you.
Net Proceeds
After subtracting closing costs, mandatory obligations, and any LESA requirement, the remaining amount is your net available proceeds. This is the actual amount you can access. For adjustable-rate options, this is the total amount available over time; the initial disbursement limit applies to the first 12 months.
Payment Options
For adjustable-rate HECMs, the comparison shows your available payment options: line of credit amount, tenure payment (monthly payments for life), term payments (monthly payments for a set period), or combinations. Review these carefully to find the option that best matches your financial goals.
Rate Information
The document shows the initial interest rate, the margin (for adjustable-rate loans), rate caps (periodic and lifetime), and the expected rate used for principal limit calculations. Understanding these figures helps you compare options effectively.
