“Constant improvements to the reverse mortgage have made it more user friendly for seniors who are looking at ways to improve their financial positions in retirement – while maintaining their independence.”
Reverse mortgages (loans that allow seniors to borrow from their homes equity without having a mortgage payment) are finally being portrayed in the media as a proper financial solution that seniors should consider to better their retirement. There are many changes that have contributed to the recent positive view of the HECM *Home Equity Conversion* program including major publications researching the benefits of taking a reverse mortgage credit line early in retirement to increase the longevity of one’s assets.
Many seniors who faced dire financial circumstances had to make the tough choice of taking out a reverse mortgage with only one spouse on the reverse mortgage (not including the younger of spouses). Before August 4th changes, both borrowers who were going to be on the reverse mortgage loan would have had to be at least 62 years of age. With the new rules in place only one borrower needs to be over the age of 62, and should that borrower pass away the younger borrower can remain in the home for as long as the property taxes and insurance are being paid (no risk of foreclosure as before). AARP sued HUD, as senior widow were being foreclosed on as soon as their husbands passed if they were left off the loan. The reason they were left off the loan was to qualify and in most cases to also qualify for a higher percentage of the homes equity (typically to pay off any existing loans).
Due to these changes borrowers with one spouse significantly younger can expect to borrow a smaller % of the homes equity since the younger of the borrower’s age is one determinant to how much equity can be released. Example is a 65-year old can borrow around 54.1%, and a 60-year-old would only be able to borrow around 51% of the homes appraised value. Going forward borrowers will not have the ability to not include a younger spouse to increase the amount to borrow. Overall this new rule will dramatically improve the reverse mortgage program and make it more user friendly and safer for borrowers with younger spouses.
Requirements and Who Can Qualify for a Reverse Loan:
At least one borrower has to be 62 years or older (it’s ok to have a younger spouse to qualify)
There has to be enough equity left in the home to cover paying off any existing mortgages should that apply to your case (equity is easy to calculate take the homes value and subtract the mortgage balance from it)
Appraisal will be orders to check the value of the home (FHA appraisal – borrower has to pay for this cost upfront, not the lender)
Income checks and credit scores checks are NOT necessary to get a reverse mortgage. There has been talk of updating the requirements to include checking your financial position, but it is not in effect as of August 4th, 2014.
Tax set-asides are also in the works. The way this will work is that a portion of the equity that you can borrow will be set-aside to cover your taxes should you not have sufficient income/assets.
Currently, there is a limit on how much you can actually spend from the amount you qualify for for the first year. Example: a homeowner eligible to withdraw a total of $200,000 in cash for the first year, would only be allowed to tap into $120,000, or 60% of that amount as the first-year limit applies. The second year this borrower can tap into the remaining balance of his original balance.
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HUD and FHA set the regulations behind the reverse mortgage. Lenders need to be licensed to provide you a quote. Our website has been helping seniors compare lenders for a reverse mortgage for over three years now. Want to find out if you qualify and how much you can borrow? just fill out our forms to get started.