The new housing bill President Bush just signed includes some changes for reverse mortgages that take hold in October. These changes will cause Reverse Mortgage Lenders to produce new marketing materials, and will likely increase the amount of discussion about reverse mortgages. Here are the changes in a nutshell:
- A higher borrowing limit on FHA reverse mortgages-- with $625,000 of home value and a $417,000 borrowing limit.
- Fees are capped at 2% of the first $200,000 borrowed and 1% on the balance
- A maximum of $6,000 in fees (this does NOT include interest or insurance).
Lenders are now prohibited from requiring borrowers to purchase insurance, annuities or other similar products as a condition for a reverse mortgage (although flood or title insurance may still be required).
These changes don't change what I suggest to my clients. Get good information from an impartial party that does not stand to benefit from advising you about your financial options. Reverse mortgages are neither good or evil...they are a financial tool that carry some risk, has pros and cons, and only a qualified impartial adviser can tell you if it's a good fit for you.
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