New Reverse Mortge Law Raises Lending Limits - Huge Difference
The Housing and Economic Recovery Act, signed by President Bush on July 30, most notable for its mortgage bailout provisions, also included raising the FHA national reverse mortgage lending limit to $417,000.
Prior to the enactment of the new law, FHA reverse mortgage limits maxed out at roughly $200,000 for most parts of country. In November, lenders began to fund reverse mortgages with the new limits in mind.
The act primarily helps senior homeowners, who own homes valued in excess of $200,160. In fact these homeowners can borrow as much as twice the amount as before. As an added bonus the closing costs on the higher loan amounts have reduced as a percentage of the value of of the home.
Wilma Johnson has ownwership in a commercial flooring company. Prior to the beginning of 2008 business was thriving. "The phone was ringing and we kept answering it". In the beginning of 2008, the phone stopped ringing as the commercial market died off. Now, one year later, at age 64, Mrs. Johnson is having trouble managing to pay her bills on time. It's not uncommon to dip into savings from time to time. Her $230,000 mortgage on her home takes up to $1,400 per month of her income.
There is no telling when Mrs Johnson's flooring business will return to pre-2008 levels. It is a big unknown? Based upon this she opted to move forward with a reverse mortgage that completely eliminated her monthly mortgage payment. She still has a mortgage but the monthly burden is gone.
A perception exists in the marketplace that the typical reverse mortgage customer owns their home free and clear and gets a reverse mortgage to supplement income.
Contrary to this belief the majority of seniors are getting reverse mortgages specifically to remove the financial burden of their current mortgage payment. Fixed incomes and increased medical and other living costs are forcing a choice for many seniors.
With the new lending limits in place many senior borrowers will realize a dramatic increase in their monthly income. Technically speaking they won't see income increasing, rather the giant expense of the mortgage payment will be eliminated. The borrower sees that as a net increase in disposable income to be used for other important life reasons.
Prior to the enactment of the new law, FHA reverse mortgage limits maxed out at roughly $200,000 for most parts of country. In November, lenders began to fund reverse mortgages with the new limits in mind.
The act primarily helps senior homeowners, who own homes valued in excess of $200,160. In fact these homeowners can borrow as much as twice the amount as before. As an added bonus the closing costs on the higher loan amounts have reduced as a percentage of the value of of the home.
Wilma Johnson has ownwership in a commercial flooring company. Prior to the beginning of 2008 business was thriving. "The phone was ringing and we kept answering it". In the beginning of 2008, the phone stopped ringing as the commercial market died off. Now, one year later, at age 64, Mrs. Johnson is having trouble managing to pay her bills on time. It's not uncommon to dip into savings from time to time. Her $230,000 mortgage on her home takes up to $1,400 per month of her income.
There is no telling when Mrs Johnson's flooring business will return to pre-2008 levels. It is a big unknown? Based upon this she opted to move forward with a reverse mortgage that completely eliminated her monthly mortgage payment. She still has a mortgage but the monthly burden is gone.
A perception exists in the marketplace that the typical reverse mortgage customer owns their home free and clear and gets a reverse mortgage to supplement income.
Contrary to this belief the majority of seniors are getting reverse mortgages specifically to remove the financial burden of their current mortgage payment. Fixed incomes and increased medical and other living costs are forcing a choice for many seniors.
With the new lending limits in place many senior borrowers will realize a dramatic increase in their monthly income. Technically speaking they won't see income increasing, rather the giant expense of the mortgage payment will be eliminated. The borrower sees that as a net increase in disposable income to be used for other important life reasons.
About the Author:
Learn more about the reverse mortgage at Reverse Mortgage - Texas Mortgage Pro's Advice. More supplemental info can be found at Home of the Texas Reverse Mortgage.
posted by Credit Counseling at
2:03 PM
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