The borrower receives a sum from the bank up-front which does not have to be repaid until the borrower moves, sells the home, or dies.
Near the end of 2017, the Department of Housing and Urban Development announced several changes to the program which is administered by the Federal Reserve.
Previously, the mortgage insurance premium fee a homeowner pays was to be based on the amount they were borrowing. Originally, a homeowner would pay 0.5% of the home’s value towards this fee unless they were borrowing more than 60% of their home’s value. In the latter instance the fee was 2.5%.
It is also worth noting, the annual mortgage insurance premium rate will decrease from 1.25% to 0.5% in an effort to offset the increased up-front costs to borrowers.
The sum maximum sum allowed is determined at the time of the loan by examining the value of the home, then current interest rates, and the age of the borrower. Due to higher interest rates, the average 2018 reverse mortgage is expected to be around 58%.
However, like most loans, a reverse mortgage is not a perfect product and should not be entered into until all of the factors, risks, etc. have been examined and explained to the borrower.
Mr. Abraham is an experienced attorney and founding member of the Law Firm of Abraham & Bauer. The Towson, MD office of the firm concentrates its practice in Estate Planning, Elder Law, Probate, Medical Assistance (Medicaid), Guardianship, Asset Preservation and Fiduciary Representation.
He is an active member in a number of professional organizations that focus on law, the senior community, and estate planning. He works with clients in Central Maryland, especially in Towson, Hunt Valley, Lutherville/Timonium, Parkville, White Marsh, Bel Air & Northern Baltimore City.
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