NATIONWIDE REVERSE MORTGAGE NOW: $417,000

New Limit: $417,000


At last the new Reverse Mortgage Limit (FHA/HECM) has been announced. This new limit will be a Nationwide Limit – not the old county by county limit. It has been raised to $417,000. By making the Reverse Mortgage one national lending amount, it will simplify things considerably for both the lender and the borrower.

This is welcome news as it bring the lending limit more in line with current housing prices (in spite of the downturn of the last couple of years).

It also means that for certain seniors who wanted to get a reverse mortgage to pay off their older, higher loan-to-value mortgage, but were a bit short of the equity to qualify (or would have to have come to the settlement table with cash), this problem may now be solved. In addition, the lender origination fee has been reduced.

There had been hope that there would be a limit of $625,000 for high-cost areas, but according to sources involved in the negotiations, just how that would be done created very complicated and uneven solutions.

So, the $417,000 was settled on as the final number.

Several other changes mandated by Congress for changes in the Reverse Mortgage are still forthcoming – such as being able to use the Reverse Mortgage for purchases, instead of only refinances; and including Co-op’s in the program.

These changes will be announced when details have been worked out. Will there ever be a differing high-cost area limit? That remains to be seen over time.

What does this mean to you if you have been considering a reverse mortgage?

To begin with it depends on where you live. Here in Northern Virginia, and Washington, D.C. the old county FHA HECM (Reverse Mortgage) limits ranged from a high of $362,790 down to a low of $264,100.

Below are a few examples; they are based on a couple aged 70, who own a $450,000 home with interest rates between 4.5% and 5.5%. These are examples only, and to see what you would might qualify for:

1. If you have been living in a county (D.C., Arlington, Fairfax) where the lending limit was $362,790, you would have received $208,000-$218,000 in net proceeds (after costs, but prior to paying off your current loan, and depending on which HECM you chose). Under the new program your net proceeds would be about $281,800, giving you approximately $62,000-$69,000 more.

2. If you have been living in a county (Frederick) where the lending limit was $361,000, you would have received $206,000-$216,000 in net proceeds (after costs, but prior to paying off your current loan, and depending on which HECM you chose). Under the new program your net proceeds would be about $281,800, giving you approximately $76,000-$86,000 more.

3. If you have been living in a county where the lending limit was $290,319, (Culpeper) you would have received $165,000-$175,000 in net proceeds (after costs, but prior to paying off your current loan, and depending on which HECM you chose). Under the new program your net proceeds would be about $281,800, giving you approximately $109,000-$117,000 more.

4. If you have been living in a county (Prince George) where the lending limit was $264,100, you would have received $149,500 - $156,700 in net proceeds (after costs, but prior to paying off your current loan, and depending on which HECM you chose). Under the new program your net proceeds would be about $281,800, giving you approximately $126,000-$133,000 more.

The new limit of $417,000 is targeted to be effective on November 1, 2008. Taking a Reverse Mortgage application, doing the mandatory counseling, getting an FHA approved appraisal and setting up settlement takes about 30-45 days. So, if you have been waiting for this limit increase, or feel the reverse mortgage would be even more beneficial to you now, it’s not too early to get started.

Also, if you currently have a reverse mortgage, and want to see if it makes sense to refinance it and get more of your equity in cash, or to put in a credit line, or have lifetime monthly payments, please call me. When you refinance, the cost of the FHA Mortgage Insurance is lower, too.

I am always available to talk with you during the day, early evenings and on the weekends at 703/244-8151. Let’s talk and see if the new arrangements work for you. As usual, there is no obligation at all.