Recent reverse mortgage program changes:

With a reverse mortgage, the amount of equity in the house and the borrowers age is what determines the maximum reverse mortgage loan amount. The money can be taken in a lump sum, in monthly payments, or as a line of credit to be used when needed. Reverse mortgages are backed by the Federal Housing Administration’s Home Equity Conversion Mortgage program, widely known as HECM loans. Borrowers must be 62 years or older to qualify.

Reverse mortgages enable older adults to utilize the equity in the home for a loan. Giving seniors another option rather than selling. Because this is a loan, it is important to go over everything before getting one. Taxes and insurance are still required to be paid by the homeowner and the house must be maintained. Like any other loan, if not used correctly, a retiree could lose their home to a reverse mortgage during retirement. If used correctly and responsibly, a revers mortgage could also be the ideal solution to fund retirement.

While with a traditional mortgage, anyone can continue to make payments, with a reverse mortgage, the loan is due when the homeowners listed on title are no longer in the house. It is important for all homeowners and spouses to be listed on title to avoid having the loan come due if only one homeowner passes away.

The federal government has tightened the guidelines, making it harder for borrowers to rush into a reverse mortgage. The Department of Housing and Urban Development made regulatory changes in 2013 to limit most reverse-mortgage borrowers to taking 60% of the available equity out of their house as determined by FHA standards, in the first year. Borrowers can utilize the reminder of the equity in their home in later years.

HUD is also thinking about requiring lenders to first assess a borrowers’ ability to meet their financial obligations on the house. Based on that assessment, the new rules can require borrowers to set aside money upfront to pay property taxes and insurance.

While another requirement is a program course that must be taken by all borrowers, it is also recommended that you speak to anyone and everyone with professional advice, such as your accountant, financial advisor, lawyer as well as children or grand children who may assist with managing your estate.