Within the past few days, there have been real changes to reverse mortgages. Of course, this option is a real change in itself – but it can be a step in the right direction for seniors. A reverse mortgage is available for home owners 62 and over. It releases the home equity in property as a lump sum, multiple payments, or a line of credit. Repayment is deferred until a home owner passes away or leaves to go into a seniors' home or other living arrangement.
A reverse mortgage can free up cash so that seniors can take care of extra expenses, enjoy life, and still be able to stay in their homes. It allows them to avoid the hassle and stress of selling. Reverse mortgages offer seniors a chance to have money to cover everything from renovations for safety reasons to that dream vacation. Recent government moves have made it even easier and cheaper for seniors to get a reverse mortgage.
HECM Saver
The Home Equity Conversion Mortgage (HECM) Saver, a federal government-backed product, has cut the upfront mortgage-insurance premium to 0.1% from 2% of the property's value. This premium brings the actual interest rate close to 6.75%. Generally, reverse mortgages have high closing costs and they favor people who are planning to stay in their home in the long term. With this latest decrease in the mortgage-insurance premium, reverse mortgages are now looking better and better – even to home owners with short term needs.
Upfront Information
Along with the change to the upfront mortgage-insurance premium, reverse-mortgage counselors have to be more 'upfront' with their clients. The Department of Housing and Urban Development is requiring all HUD-approved reverse-mortgage counselors to provide their clients with every available piece of related information. Clients will be receiving a 28-page consumer booklet on reverse mortgages, a tour of the new "Financial Interview Tool," and an invitation to check out the BenefitsCheckUp program.
Pricey Prerogative
The Generation Plus Loan, available through Generation Mortgage, targets homeowners 62 and over who own homes with a value between $500,000 and $6,000,000. Unlike the Home Equity Conversion Mortgage (HECM) offered by HUD, this jumbo reverse mortgage requires no mortgage insurance but has a higher interest rate. The Generation Plus loan carries a fixed rate of 7.78% or 8.78% - depending upon the program.
The funds must be taken at closing and there is a required minimum FICO score of 700. Requesting a specific credit score might seem odd to people. Keep in mind, however, that there is no mortgage insurance requirement with this program. The lender needs to know if a home owner has the financial resources to maintain the property.
Jumbo reverses have been made available by various lenders since 2000. With the housing crisis, many jumbo reverse plans went out of favor in 2008. The chairman of Generation Mortgage explains the advantage of the Generation Plus loan.
“The NO. 1 priority of seniors is they want to stay at home as long as possible, and it’s the least expensive place for them to be," says Jeff Lewis, chairman of Generation Mortgage.“The Generation Plus simply gives more of them an opportunity to do so.”
Actually, reverse mortgages have fallen by 30% during the past fiscal year. With the HECM Saver and other incentives, it is believed that more seniors will take advantage of reverse mortgages in the coming year.
Are You Planning To Take Out A Reverse Mortgage?
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