Housing bill raises reverse mortgage limits

As a financial planner, I am often asked about reverse mortgages. In certain scenarios a reverse mortgage can be a useful tool in making your retirement work.

The Housing and Economic Recovery Act of 2008 made changes to reverse mortgages effective October 1, 2008. They include higher borrowing limits and protections from aggressive marketing.

A homeowner who is at least 62 years old can use a reverse mortgage to access home equity. It doesn't have to be repaid until the owner moves permanently, sells or dies.

The act raises the maximum amount for a reverse mortgage to $417,000 (or $625,500 in areas of high housing costs) from the previous limits of $200,160 and $362,790.

The amount that can be borrowed depends on the value of the home, its location, current interest rates and the borrower's age.

Loan origination fees may not exceed two percent of the initial $200,000 and one percent of the remaining balance up to a maximum fee of $6,000.

The loan originator's duties include all arrangements related to the loan until the loan is granted.

Lenders are prevented from requiring borrowers to purchase insurance, annuities, and other products as a condition for obtaining the mortgage, or allowing others to attempt to sell financial products as part of the closing process.

If you would like to learn more about how to prepare for your retirement please give me a call at 630-232-9811 or drop me a note at deanakey@allstate.com