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Is a reverse mortgage still worth considering? New Upfront Cost Of A Reverse Mortgage; federal rules that took effect Oct. 2 will raise upfront costs for some homeowners seeking a reverse mortgage, and reduce maximum loan amounts for most, raising the question: Is a reverse mortgage still worth considering? Most experts say yes …New federal rules that took effect Oct. 2 will raise upfront costs for some homeowners seeking a reverse mortgage, and reduce maximum loan amounts for most.
Most new borrowers will pay bigger premiums upfront but lower ones over the life of the loan, lessening the risk to taxpayers if seniors live longer than predicted. Borrowers will now pay 2% of the amount of the home’s value upfront and 0.5% annually over the course of the loan.
Currently, most borrowers pay 0.5% upfront and 1.25% annually over the remainder of the loan. Some who borrow more than 60% of the amount they can borrow against the home in the first year already pay 2.5% upfront so they will see premiums go down slightly.
On balance, most seniors will also be able to borrow less money. The average borrower at current interest rates will be able to borrow roughly 58% of the value of their home, down from 64%.
Although the increasingly popular strategy of taking a reverse mortgage line of credit—known as a standby reverse mortgage—may become less useful because credit lines will now grow more slowly.
That type of reverse mortgage “is a much less appealing option moving forward,” says Jamie Hopkins, associate professor at the American College of Financial Services in Bryn Mawr, Pa.
A Reverse Mortgage is a federally backed loan against a home’s equity that requires no monthly payments and is available to homeowners 62 and older. Proceeds can be taken as a lump sum, monthly income for life or line of credit. Interest charges are added to the debt, which doesn’t have to be paid off until the borrower dies or no longer uses the property as a primary residence. As long as the borrower keeps up with taxes, insurance and maintenance, the lender cannot call the loan, and the lender can never recover more than the home fetches in a sale, even if the debt is larger, protecting the borrower’s other assets.
“New Upfront Cost Of A Reverse Mortgage”: was provided by Art Di Segna, a recognized leader in his field. Art can be contacted via email at Art@FineHomesOfTexas.com by phone at (281) 415-5888 or Contact Me. Art has helped hundreds of people move in and around many Houston towns for the last 14+ years.
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