Reverse Mortgages are a Retirement Savior

Reverse mortgages allow people who are age 62 and older to borrow against their home equity, and then get paid in regular installments by the mortgage company. Now that higher limits have been authorized for reverse mortgages, this good retirement resource just got a whole lot better.

A reverse mortgage allows people 62 and older to borrow against their home's equity without making any payments to the lender. Instead, the lender pays the homeowner, so the typical relationship between a homeowner and mortgage company is reversed. The Home Equity Conversion Mortgage (HECM), or reverse mortgage, allows retirees to stay in their homes, but still withdraw cash out of it to pay living expenses. Reverse mortgages don't have to be repaid until the homeowner dies or moves.  The funds can be taken in a lump sum, as a line of credit, in monthly payments, or through a combination of these options.

A HECM is a useful and convenient resource for any senior who doesn't want to sell his home in order to enjoy higher limits of equity appreciation. For older Americans, their home is, after all, their most valuable asset. But selling, especially during a bear market, is not a sensible option. And thanks to recent changes in regulations regarding reverse mortgages, they're safer and more user-friendly than every before.

Easier reverse mortgages

New legislation has made the terms and conditions of reverse mortgages much more transparent, which minimizes the chance that borrowers will accidentally or unwittingly sign paperwork that they don't fully understand or agree to. And FHA-insured HECMs can only be approved after the consumer has been given special financial counseling from a HUD-certified professional. This helps ensure that borrowers know exactly what they're getting themselves into.  It's also a proactive step to help avoid mortgage fraud against senior citizens.

HECMs with higher limits

One of the most significant new developments regarding reverse mortgages is that they now have much higher limits. The new nationwide ceiling on the amount that a senior can borrow with a reverse mortgage is $417,000 in the continental U.S., and $625,500 in the traditionally more expensive housing markets of Alaska and Hawaii. In the past, the amounts were smaller and tied to particular regions, so that homeowners in some parts of the nation where housing prices were lower had diminished opportunities to borrow, even if their equity was higher than the imposed ceiling.

With the new higher across-the-board limits, mortgage companies anticipate a surge in reverse mortgage refinancing. Those who already hold a reverse mortgage may be inspired to refinance that existing loan and tap into more of their equity by taking out a new reverse mortgage with higher limits. Now that the U.S. boasts the largest population of seniors in its history, it's no wonder that so many graying Americans are no longer averse to the reverse, opting for a mortgage that makes dollars and sense.