Reverse mortgages have long been the black sheep of the mortgage industry. Often playing a vital part in seniors’ ability to have peace of mind in retirement, they tend to be viewed with a lot of scepticism. However, the Federal Housing Administration is the powerhouse behind this government backed loan program and a reverse mortgage also known as a HECM (Home Equity Conversion Mortgage) could be a powerful tool in building your retirement nest egg.
If you are considering a reverse mortgage or HECM, you should be aware that HUD, the U.S. Department of Housing and Urban Development, recently announced several changes to the reverse mortgage program. These changes, effective October 2, 2017, are designed to make the program slightly stricter to help secure the long-term health of the program. However, not all the changes are necessarily negative.
One of the changes to the reverse mortgage program is in the initial mortgage insurance premiums. These initial premiums, under the former program would vary, dependent upon the percentage of the available loan that the borrower would withdraw. It is now a standard premium regardless of the amount of available home equity available for withdrawal. For some borrowers this standardization has resulted in higher costs to take out a HECM; however, for many borrowers this standardization lowers the initial costs. In addition, the annual HECM MIP has been reduced making the mortgage less costly over time. This new reduction could save the borrower up to thousands of dollars each year.
Lastly, the principal limit factors have changed. What does this mean for borrowers? Generally, borrowers are limited in the amount of home equity they are allowed to withdraw. However, it is likely that lenders may offer lower interest rates. This could be very beneficial to the borrower.
A reverse mortgage (HECM) can be complicated. In addition to the federal counseling that is required for the program, it is important to work with a trusted lender who knows and understands the program changes. Review the HECM program guidelines and decide for yourself if a reverse mortgage is right for you or your loved one.
If you are thinking of obtaining a reverse mortgage or would simply like more information about the reverse mortgage program, talk to the lending experts at Lenox/WesLend Financial or call 844-225-3669. As heard on the radio, it’s the biggest no-brainer in the history of mankind.