The new law makes it easier and less expensive for seniors to access the cash value of their homes on a tax-free basis through a Reverse Mortgage. And it expands the amount that can be borrowed.
Now there will be a higher borrowing level on FHA reverse mortgages - with $625,000 of home value as a cap and a $417,000 borrowing limit. And fees will be capped at 2 percent of the first $200,000 borrowed, and 1 percent on the balance - with an absolute maximum of $6,000 in fees.
These rules apply to FHA mortgages, which insure the lender against the possibility that the homeowners will stick around far longer than anticipated! Other lenders provide "jumbo" reverse mortgages for higher amounts, taking larger fees to offset their risk. But there is no risk to the homeowner, who gets the money - and the house - for as long as they choose to live there.
A reverse mortgage may be the perfect answer for seniors who want to stay in their homes but have a cash flow problem. They can get a monthly stream of tax-free income, or a lump sum, and it's tax-free. Their ability to access the equity in their home does not depend on their ability to repay, as in the case of a home equity loan. In fact, the Reverse Mortgage is not repaid until they move and sell the home, or until they die and their heirs either sell or refinance the home.
The most important aspect of a Reverse Mortgage is that the homeowner retains title to the home, and can never be forced to move out - no matter how long he or she lives, or how much equity he or she pulls out of the home over the years through monthly checks from a Reverse Mortgage! And they - or their heirs - can never end up owing more than the house is worth, no matter how much money is withdrawn over the years!
The amount the homeowner can withdraw depends on several factors: the value of the home, the amount of any remaining mortgage, the age of the homeowner(s), and the current level of interest rates.
www.SeniorMortgageLender.com & www.GregZaccagni.com
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