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Reverse Mortgage Update
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HUD (The Department of Housing and Urban Development) recently updated some of the rules around reverse mortgages. Overall, the cost of these loans will go up. HUD increased the cost of setting up a reverse mortgage loan, reduced the annual mortgage insurance premiums, and decreased the maximum amount you can borrow. These changes were necessary to make reverse mortgages sustainable. And even with the changes, these loans are worth considering if you plan to stay in your house for the rest of your life.
What is a reverse mortgage? I wrote a newsletter on it last year: >Get newsletter
If you’re a millennial and aren’t willing to read that much, a reverse mortgage is a loan that people age 62 and older can use to tap home equity for retirement spending. Unlike any other mortgage or home equity loans, you don’t need to make payments. You can let the outstanding balance grow as you draw out cash.
Reverse mortgage loans are sold by private companies, but the industry is heavily regulated because the government doesn’t want elderly people forced out of their homes. So they limit how much you can borrow. There is also a mortgage insurance fund to cover the lenders if the loan gets bigger than the value of the house. You still won’t have to move out at that point and your heirs won’t have to make up the difference if you pass away. The lender gets to sell the house and the insurance fund covers any losses.
Obviously such a big guarantee only works if the insurance fund doesn’t have to pay out very often. The recent changes reduce risk for the government insurance fund, which is a good thing. Reverse mortgages aren’t the right choice for everyone, but they are a cool tool to use in some cases. Hopefully these tweaks keep this program around for a long time.
I’m the kind of numbers geek who can help you evaluate whether or not a reverse mortgage is right for you. Let me know if you have questions.[/fusion_text][separator style_type=”single” top_margin=”” bottom_margin=”” sep_color=”” icon=”” width=”” class=”” id=””][fusion_text]
Legal Disclaimer: These posts do not constitute an offer or recommendation to buy or sell any securities or instruments or to participate in any particular investment or trading strategy. They are for informational purposes only. ASA gathers its data from sources it considers reliable. However, ASA makes no express or implied warranties regarding the accuracy of this information or any opinions expressed by the author and may update or change them without prior notification.
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