As of 1/1/2009, seniors age 62 and older can use a federally insured Reverse Mortgage to purchase a home. Under the same HECM program that is being used by many seniors to access the cash equity in their home, seniors now have another tool to use when they look at purchasing a new home.
The FHA insured HECM is a huge improvement to the old Fannie Mae Homekeeper that could be used to purchase a home.
As it currently stands, a senior looking to purchase a home would either have to pay cash or qualify for a mortgage based on their fixed income. For many, this would liquidate their savings or prevent them from buying a home that they felt comfortable living in.
With the new program, a senior could either purchase more home without having a monthly mortgage payment, or free up a significant amount of their cash to live on or invest elsewhere.
While we don’t know all of the details, we can assume that the lending limits for purchases will be similar to the limits for refinances. If so, here are some examples of what you could expect:
A 62 year old borrower could purchase a $250,000 home with an approximate down payment of $120,000. There would be a lien against the property, but there would be no monthly mortgage payment. As with a reverse mortgage used for a refinance, the loan, plus interest would be due and payable upon death or 1 year after moving out of the property.
If this same borrower was 75, the $250,000 home would require a down payment of approximately $90,000.
Look for more details here as the dust settles. Technically, we can’t even take an application until 1/1/09, so I don’t have a calculator that will give me more exact figures.
That said, if you are a senior, and looking at purchasing a home next year, you should at least consider using a Reverse Mortgage.
Call me, Larry, if you have any questions. 503-421-0096
A new exciting component of the recent FHA modernization that was recently passed and signed into legislation is the increase in loan limits for the FHA’s HECM Reverse Mortgage. Previously, loan limits were based by county, and the more rural the county, the lower the limits.
Now, all counties will be at $417,000.
So what does this mean to you?
If you are 75 and own a home worth $400,000 free and clear and live anywhere in Oregon, under the new limits, you would qualify for approximately $270,000. This is a major increase over the old limits. Previously, this borrower would have qualified for approximately $196,000.
In the above situation, the proceeds could be taken as a lump sum of $270,000, a monthly annuity of around $1700 per month or kept as a line of credit and used as needed.
If your home is worth more then $417,000, then you are still capped at $417,000 in home value. The upside to this is that you will still have a lot of equity left in your home.
The new limits combined with a limit on closing costs will allow more seniors to benefit from a Reverse Mortgage.
Call me for details on your exact situation.
Many seniors are finding themselves House Rich and Cash Poor. There just doesn’t seem to be enough money left over at the end of the month, or they are having to tap into the principle of the retirement funds in order to enjoy a comfortable retirement.
A Reverse Mortgage is a financial tool for seniors that allows them to unlock the equity in their homes. While it is technically a loan against the equity, it has several key differences from a traditional, or forward, mortgage. A Reverse Mortgage is:
This is just a brief summary of what a Reverse Mortgage is. Watch the video on the link at the top of the page, or contact me for a customized quote on just how much you would qualify for… or if a Reverse Mortgage is even right for you.
