 |
 |
|
|
|
What the Higher Limit Extension means for Reverse Mortgage Borrowers
Carlsbad, CA
Friday, November 06, 2009
On October 30th, Reverse Mortgage Daily reported that both 'the House and Senate passed an extension of the $625,500 Home Equity Conversion Mortgage (HECM) loan limit for reverse mortgages through December 31, 2010. Loan limits for the Home Equity Conversion Mortgage (HECM) would've returned to $417,000 at the end of the year if the extension wasn't passed'.
As a side note, the HECM loan limit had been omitted from the Continuing Resolution conference report heading to the House according to Peter Bell of the National Reverse Mortgage Association (NRMLA). The organization's legislative team pointed out this oversight and made certain that it was added in.
For the reverse mortgage applicant who lives in a higher valued home, this extension is vital. The number one reason that a senior takes out a reverse mortgage today is to pay off an existing mortgage. When the amount available through the program exceeds the mortgage balance owing, the senior either needs to bring additional funds to the closing table or forget about doing a reverse mortgage for the time being.
The following chart, using the fixed rate 5.56% FHA/HUD insured reverse mortgage illustrates the difference between the two limits in total money available. It depicts the net amount available to the senior after deducting all settlement fees and the Government's Mortgage Insurance Premium:
Age $625,500 Limit $417,000 Limit
62 $327,800 $215,075
65 $341,625 $224,350
70 $364,400 $239,575
75 $388,400 $255,700
80 $413,825 $272,775
The difference in the amount available to the senior ranges from $112,725 at age 62 to $141,050 at age 80. For many currently applying for a reverse mortgage the extension will be a godsend enabling them to stay in their home without having to make a monthly mortgage payment.
As a side note, the HECM loan limit had been omitted from the Continuing Resolution conference report heading to the House according to Peter Bell of the National Reverse Mortgage Association (NRMLA). The organization's legislative team pointed out this oversight and made certain that it was added in.
For the reverse mortgage applicant who lives in a higher valued home, this extension is vital. The number one reason that a senior takes out a reverse mortgage today is to pay off an existing mortgage. When the amount available through the program exceeds the mortgage balance owing, the senior either needs to bring additional funds to the closing table or forget about doing a reverse mortgage for the time being.
The following chart, using the fixed rate 5.56% FHA/HUD insured reverse mortgage illustrates the difference between the two limits in total money available. It depicts the net amount available to the senior after deducting all settlement fees and the Government's Mortgage Insurance Premium:
Age $625,500 Limit $417,000 Limit
62 $327,800 $215,075
65 $341,625 $224,350
70 $364,400 $239,575
75 $388,400 $255,700
80 $413,825 $272,775
The difference in the amount available to the senior ranges from $112,725 at age 62 to $141,050 at age 80. For many currently applying for a reverse mortgage the extension will be a godsend enabling them to stay in their home without having to make a monthly mortgage payment.
Ken Keranen
Reverse Mortgage Specialist
Legacy Home Financing
Carlsbad, CA
800-747-8006
