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Home Equity Conversion Mortgage (HECM)- extra stuff!

There were significant changes to the HECM reverse mortgage program effective October 2017.  Average amounts available were reduced about 8% and the former “standard” and “saver” programs merged, the up front mortgage insurance is now the sale for all loans, and the annual mortgage insurance was reduced. There are important considerations impacting the cost of your reverse mortgage.

Mandatory Obligations include and existing mortgage in the case of a refinance  the purchase price in the case of a purchased transaction. Available funds in the first year are limited to mandatory obligation of 10%.

Careful planning will be important to optimize your benefits and reduce your costs. Options to receive proceeds from your reverse mortgage include a monthly payments, lump sup payment, a line of credit or a combination of the three. Funds are advance to the borrower and interest and mortgage insurance accrues on outstanding balance.

A reverse mortgage is due when  all borrowers no longer live in the home. At no point will the borrower owe more than the then current value of their home. If the loan balance were to exceed the value of the home, FHA insurance – not the borrower or their estate – pays the difference. As always with a reverse mortgage, there is no risk of passing the mortgage debt to heirs. However, all equity that is available once the loan has been repaid is returned to the heirs

Certificate of occupancy is no longer required prior to starting the process when purchasing a newly built home. Previously that was a significant impediment to purchasing a newly built home because new owners and builders didn’t want to wait 30 days 45 days after home is completed to complete the transaction.

A Non-Borrowing Spouse or owner can remain on title along with the borrower. They must receive the HECM counseling and sign documentation acknowledging that the property is encumbered by the reverse mortgage. This also can allow the non-borrowing spouseor owner to remain in the home if the borrowing spouse / owner predeceases them. A non-borrowing spouse/owner will lose access to new funds from the reverse mortgage.