Moving Forward With Reverse Mortgages
By Rick Tobin
Image by ClkerFreeVectorImages from Pixabay
An estimated 37 % of all singlefamily homes in the US were reported as being free and clear with no mortgage debt back in June 2019 . Today , many homeowners are likely to have lots of equity in their homes , but not as much cash available for their daily spending responsibilities . This is especially true for homeowners who purchased their homes more than five to 10 + years ago after many of these properties doubled in value .
The simplest way to explain what a reverse mortgage is to describe it as a hybrid or combination of a traditional mortgage , a line of credit , and a life insurance policy . The higher the property value , the older the borrower , and the lower that the current interest rates are like they are today the larger the reverse mortgage loan amount that you may receive .
However , the main difference between a reverse mortgage and other types of financial instruments is that there is no monthly payment required to be made by the homeowner after they receive the taxfree income . Two of the most important qualifying guideline factors include the fact that at least one of the borroweroccupants in the household must be at least 62 years of age , and it is required to be their fulltime residence within a residential property ( 14 units ).
Higher 2021 Loan Limits
As of January 1 , 2021 , the new maximum loan amounts have increased by $ 56,775 to $ 822,375 for certain highcost regions found in California such as in Orange , Los Angeles , Alameda , Marin , Santa Clara , and San Francisco counties as well as in other states . The loantovalue ( LTV ) allowances for various types of reverse mortgages can range from 60 % to 80 % LTV , depending upon factors such as borrowers ’ age and the selected reverse mortgage structure .
As per the U . S . Department of Housing and Urban Development ’ s Mortgagee Letter 202042 that was issued on December 2 , 2020 :
Maximum Claim Amount Limits For the period January 1 , 2021 through December 31 , 2021 , the maximum claim amount for FHAinsured HECMs will be $ 822,375 ( 150 percent of Federal Home Loan Mortgage Corporation ’ s ( Freddie Mac ) national conforming limit of $ 548,250 ). This maximum claim amount of $ 822,375 is also applicable to Freddie Mac ’ s special exception areas : Alaska , Hawaii , Guam , and the Virgin Islands .
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