New reverse mortgage laws will affect how much you can borrow.
Have you been considering a reverse mortgage for a few years?
If so, you should revisit the rules and evaluate whether a reverse mortgage would benefit you.
According to a recent Kiplinger article titled “New Rules for Reverse Mortgages,” the rules for reverse mortgages have changed yet again.
First, upfront mortgage premiums will be a flat two percent for every loan.
What does this mean?
You will pay more if you qualify to take up to 60 percent of the eligible loan amount in the first year with the remainder taken the following year.
In fact, your premium will increase by 1.5 percent.
What about if you qualify to take more than 60 percent in the first year?
Your premium decreased by 0.5 percent.
Another change involves the ongoing insurance costs.
These costs will decrease for all borrowers from 1.25 percent to 0.5 percent over time.
These savings could offset costs upfront.
Maximum loan proceeds calculations will also be adjusted.
The percentage of the home value available to borrow at most interest rates and ages will drop.
It is expected to cut proceeds by 10 percent to 12 percent.
Most individuals will qualify less than they would have before the rule change.
When will the changes be effective?
They actually are already in effect as of October 2.
What is the purpose of the changes?
The changes were an effort to help the federal Home Equity Conversion Mortgage program—specifically its insurance fund.
Overall, the new rules could make reverse mortgages unavailable to many seniors and at higher costs for the rest.
If you do not know whether a reverse mortgage is a viable option for you, work with an experienced elder law attorney.
He or she will be able to walk you through what these changes mean for you.
Remember: “An ounce of prevention is worth a pound of cure.” When making your financial, tax and estate plans, do not go it alone. Be sure to engage competent professional counsel.
For more information about estate planning in Overland Park, KS (and throughout the rest of Kansas and Missouri), visit our estate planning website and be sure to subscribe to our complimentary estate planning e-newsletter while you are there.
Reference: Kiplinger (September 11, 2017) “New Rules for Reverse Mortgages”