Reverse Mortgages Increasingly Available for High-Value Homes
Seniors with pricier homes now have an increased ability to get a bigger reverse mortgage in order to raise cash for retirement. As the housing market has improved, so-called jumbo reverse mortgages are becoming more popular even though they carry some risk.
Reverse mortgages allow homeowners who are at least 62 years of age to borrow money on their homes. The homeowner receives a sum of money from the lender, based largely on the value of the house, the age of the borrower and current interest rates. The loan does not need to be paid back until the last surviving homeowner dies, sells the house or permanently moves out.
The most widely available reverse mortgage product is the Home Equity Conversion Mortgage (HECM), the only reverse mortgage program insured by the Federal Housing Administration (FHA). However, the FHA sets a ceiling on the amount that can be borrowed against a single-family house, which is determined on a county-by-county basis. The national limit on the amount a homeowner can borrow is $625,000.00. A jumbo reverse mortgage is not insured, so it does not have the protections set by the federal government for HECM reverse mortgages.
During the housing market collapse, most lenders stopped offering jumbo reverse mortgages, although as the market has improved, the jumbo is returning. A reverse mortgage is not the right step for everyone. Talk to your attorney about whether it makes sense for you.
Ms. MacDonald’s practice is limited to Estate Planning, Probate & Trust Administration. Ms. MacDonald maintains her practice in the Santa Clarita Valley at 25115 Avenue Stanford, Suite A-209 in Valencia, California. She can be reached at 661-294-6464.
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