The New Reverse Mortgage—3 Trends Driving Your Decision Today

Many retirees consider their home equity as part of their retirement plan. Because it is an investment that has grown over time, it’s often a major consideration as an asset that can be used to help influence cash flow and/or savings in retirement. If you have been considering a reverse mortgage as a way to tap into your home equity, or if you are in the market for the first time, there are a few things you should know about the new reverse mortgage, available now under the government-insured Home Equity Conversion Mortgage program. It comes with more safety measures. The Federal Housing Administration, which insures all HECM loans, implemented changes to its reverse mortgage program in late 2013 in the interest of better protecting both borrowers and the FHA’s insurance fund. Under the new reverse mortgage, FHA has restricted the amount of money borrowers can take upfront to help prevent borrowers from taking out all of their proceeds at once and then running out of money for their ongoing financial obligations. Non-borrowing spouses are getting new protections. In April, the FHA announced it will soon be incorporating added protections for non-borrowing spouses of reverse mortgage borrowers. For new reverse mortgages originated starting on August 4, 2014, non-borrowing spouses will be able to defer reverse mortgage repayment for as long as they remain in the home. There are certain requirements the couple must meet, such as disclosing the marriage at the time of the loan closing, and continuing to pay property tax and homeowners insurance even if the borrower passes away or moves from the home to pursue long-term care. Those requirements can be found on the website for the Department of Housing and Urban Development. It allows you to stay in your home, or buy a new one. Beginning in 2014, the new reverse mortgage product, the HECM for Purchase, was made available in every state. This new reverse mortgage allows borrowers to take out a reverse mortgage and purchase a new home within a single transaction. This saves on closing costs, time and paperwork for the borrower. The reverse mortgage for purchase can be used to purchase a home in any state, as long as it is the borrower’s primary residence. Borrowers have successfully used this new reverse mortgage to downsize, move closer to family or friends, or simply to buy a brand new home. Learn more about the new reverse mortgage features or use our reverse mortgage calculator to see how much you may be eligible to borrow.