Reverse mortgages now less costly.
If you are 62 or older and interested in a reverse mortgage you now have more choices as upfront fees have come down substantially and some lenders are eliminating them totally and even offering to pay some of the mortgage insurance premium fees up front.
A reverse mortgage allows homeowners to use the home’s equity while still living in their home. The amount available of course depends on the age of the borrower and the appraised value of the house. The money can come in a lump sum or installments, or you can establish an home equity line of credit.
The reason for this drop in cost is that investors are looking for securities backed by those mortgages. The securities backed by Ginnie Mae and based on a reverse mortgage backed by the FHA make for an attractive package, and investors are willing to pay a premium. Lenders are passing on those premiums to borrowers in the form of lower fees.
Borrowers need to shop carefully for these mortgages and wade through all the offers being presented.
With the declining value of homes these kinds of mortgages are not as popular. Those that took out reverse mortgages when home prices were at their peak will not see changes to their loans. There are people who have higher balances than the home is worth, but won’t be on the hook if they or their heirs have to sell. Because of the FHA insurance they will never have to pay more than the home is worth.
However, because of falling home prices the H.U.D. imposed a 10% reducing in borrowing limits for FHA-insured reverse mortgages.
In the past seniors have taken out reverse mortgages in order to make ends meet and pay off bills, but now people who normally would have sold their home are taking out these mortgages in order to be able to stay in their home until they can sell because they can’t sell now and the money will eliminate their mortgage payments.
Distressed homeowners are looking at reverse mortgages especially those facing foreclosure. For them they are a lifesaver.
This type of financing is only for people looking at staying in their homes for a long time.
Check out the HUD Website for more information on taking out a reverse mortgage.
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