Two big lenders are exiting the reverse mortgage business and the limit on how much you can borrow is scheduled to drop, the Wall Street Journal reported this weekend. Here’s the scoop:
…enough commercial lenders remain, for now, to service the reverse-mortgage market. And borrowers should still be able to find discounts on origination fees.
What is more worrisome in the short run is that a big incentive could end after September: The limit on the maximum amount of equity that lenders can use to determine the amount that borrowers can extract from their homes using federally insured reverse mortgages is set to fall to $417,000 from $625,500, unless Congress or the Department of Housing and Urban Development extends the higher limit. Also on the chopping block is federal funding for the counseling required to take out an FHA-backed reverse mortgage.
Applications for reverse mortgages could soon get more complicated, too: Borrowers may be required to provide additional information so lenders can assess whether they need to set aside funds to cover taxes and insurance.
“The good advice is to do it this summer,” says Barbara Stucki, vice president for home-equity initiatives at the National Council on Aging, a Washington-based advocacy group.
I wrote earlier this year in “A deal that could save your parents” that reverse mortgages have gotten a lot better recently, and are worth a look when older folks need additional cash for living expenses. You should still do your research and get a third party’s input on whether this makes sense, but if you’re ready to act you should probably do so soon.
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