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HUD Makes Reverse Mortgages a Little Less Attractive
- February 28th, 2018
The Department of Housing and Urban Development (HUD) has announced changes to the federal reverse mortgage program. Citing the need to put the program on better financial footing, HUD will raise reverse mortgage fees for some borrowers and lower the amount homeowners can borrow.
A reverse mortgage allows a homeowner who is at least 62 years old to use the equity in his or her home to obtain a loan that does not have to be repaid until the homeowner moves, sells, or dies. In a reverse mortgage, the homeowner receives a sum of money from the lender, usually a bank, based largely on the value of the house, the age of the borrower, and current interest rates. Seniors sometimes use the loans to pay for long-term care.
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Hammond and Associates, LLC, Elder Law, Estate Planning, Wills, Trusts, Probate
For Jeffrey Hammond, the practice of Elder Law is personal. Jeff’s many years of experience in law and in business did not prepare him for the crisis he faced in 2005 and 2006 when his father suffered a stroke and both of his parents suffered from dementia and other medical problems. At that time, Jeff began an i...
Law Offices of John L. Laster
John Laster is a lawyer licensed to practice in Virginia, Maryland and the District of Columbia. He limits his practice to wealth transfer planning, trusts, wills, powers of attorney, health care decision-making issues, estate administration and related tax, elder law and disability concerns. Listed in The Best Lawyers...
Ron M. Landsman, P.A.
Ron M. Landsman has been practicing elder law since 1983, before it was known as elder law, originally with Landsman and Laster, Washington, D.C., then Landsman, Eakes and Laster, also in Arlington, VA, and since 1990 in his own practice in Montgomery County, Maryland. He has been among the most active members of the...
To start, HUD is changing the mortgage insurance premium fees that homeowners pay in order to obtain a loan. Currently, homeowners pay 0.5 percent of the value of their home as an upfront mortgage insurance premium on smaller loans, but homeowners who take out a loan that is more than 60 percent of their home's value pay a 2.5 percent premium. The new rule will require homeowners to pay a standard 2 percent upfront mortgage insurance premium. Homeowners considering a large reverse mortgage may want to wait until after the new rules go into effect. To offset the upfront costs, the annual mortgage insurance premium rate will be dropped from 1.25 percent to 0.5 percent.
In addition, HUD is lowering the amount that homeowners can borrow. The average that a borrower at current interest rates will be able to borrow is only around 58 percent of the value of their home, down from 64 percent.
The changes are set to go into effect on October 2, 2017. The changes will only affect borrowers who take out new loans; they will not affect existing loans.
For more on the new requirements, click here.
Last Modified: 02/28/2018