Cheaper Reverse Mortgages May Be Coming
Starting in October, a new reverse mortgage will be available through the Federal Housing Administration (FHA), called the HECM Saver. This will offer a choice to borrowers who are seeking a reverse mortgage to help pay for expenses, such as long-term care. Essentially, the upfront mortgage insurance fees, which are 2% of the homes value, are eliminated. The downside is that the amount seniors can borrow will be 10-18% less. This program will be beneficial to those seniors who do not wish to borrow the full amount available with the HECM Standard loan, as well as reduce FHA losses.
Reverse mortgages can be used to help with long-term care needs, such as home care. For more information about home care available in the Minneapolis area, visit www.angelcaremn.com.
“Under a reverse mortgage, consumers can access a percentage of their home’s equity. The percent depends on their age and other variables. They use these funds to first pay off any existing mortgage on the home. They then can take the remaining money in a lump sum, spread it over monthly payments, or have a line of credit (guaranteed by the government) that they can draw down as needed. They need make no further mortgage payments and can live in the home as long as they’re able. They must continue to pay any taxes and home insurance, and maintain the property.
When home owners leave the house or die, any remaining equity in the home can be passed on to their heirs. If they’ve carried a reverse mortgage for a long time, it’s likely the lender would have earned loan payments exceeding the equity of the home. Because HECM loans are what’s called “non recourse” loans, there is no financial obligation to the home owners or their heirs should loan charges exceed the value of the property.
“The upfront mortgage insurance premium has been a deterrent to some prospective borrowers, particularly those needing less than the full amount available under the traditional HECM Standard program,” said Peter Bell, NRMLA president. “This new variation, the HECM Saver, presents a sensitive response to their needs.”
Read more from USNews.com, Cheaper Reverse Mortgages May Be Coming
