Last week the FHA announced some important changes to HECM reverse mortgages which will go into effect October 2, 2017. If you already have a loan in place or have signed an application by this date, this will not impact you. But if you are still in the thinking stage, you should consider the possible financial impact on you.
Here’s a run-down of the changes…
There will be a reduction on how much you can borrow. Remember, how much you borrow is based on an FHA formula that also includes your appraised home value, the current interest rate and your age.
The FHA upfront mortgage insurance fee, which is charged at closing, will increase for most borrowers. BUT the FHA ongoing mortgage insurance premium will be reduced. This is very good news. What HUD says about this reduction: “…this reduction preserves more equity for borrowers over time by slowing how quickly the loan balance grows”.
The FHA made these changes to help address both concerns and costs to make the reverse mortgage process less expensive and more efficient for the borrower.
For some people, there is a definite advantage to getting a loan application in before the changes. For others, delaying until October may be the best plan. I am more than happy to review how these changes could impact your personal situation.
Sara Cornwall is a local Reverse Mortgage Advisor serving the entire state of Connecticut. Contact Sara and learn if reverse mortgage is right for you.