For seniors who are interested in getting a reverse mortgage, starting November 1 they will be able to access more money and pay lower fees thanks to housing legislation passed earlier this summer.
The vast majority of seniors age 62 or older (90%+) who get a reverse mortgage go through the FHA Home Equity Conversion Mortgage (HECM) program. Prior to November 1, seniors could borrow against the lesser of either their home’s value or a limit that ranges from $200,000 to $362,790, depending on location.
But effective November 1, the limit is slated to rise to $417,000 nationwide under the new rules which means that seniors will be able to access more of the equity in their home and turn it into cash.
Another benefit of the recent legislation changes is that seniors who borrow more than $200,000 will pay less in fees when going through the FHA HECM program. Homeowners currently pay a 2% origination fee on HECM reverse mortgages and under the new law, they will pay 2% on the first $200,000 and 1% on the rest with the total origination fees not to be more than $6,000.
Who is should consider a reverse mortgage?
According to Susan Wachter, a professor or real estate at the University of Pennsylvania’s Wharton School of Business:
“There is a niche household a reverse mortgage is exactly right for and that person knows they want to stay in their home until death, and they really need the cash to allow them to do so.”