Lately a number of reverse mortgage companies have lowered down their initiation charges significantly and some have even been offering cash incentives by covering the mortgage insurance fees associated with a reverse mortgage.
The companies are keen to provide the borrowers who qualify some given criteria in these tough economical times. The upfront charge that was levied was the most criticized aspect that seniors had up until now.
With many reverse mortgage companies reducing or in some cases eliminating upfront fees it becomes very important for the borrower to weigh the pros and cons of every offer in detail. Some companies who do not claim their upfront fees will charge a higher interest rate or offer less loan equity. Other companies may just decrease fees but offer a much more attractive interest rate linked with the reverse mortgage loan.
The FHA Modernization Act of 2008 has laid down a new single national loan limit for reverse mortgages up from $271,050 to $417,000. This modification up from $271,050 opened new avenues for seniors with homes valued higher than $271,050 to take benefit of this plan. Moreover, at least through the end of 2010, this limit will be provisionally increased to $625,500, which is an added advantage for seniors whose home values go beyond the present national limit of $417,000.
An additional benefit for the consumers is present in the HUD-set limits on reverse mortgage initiation fees. Earlier, this fee was 2 percent of the maximum claim figure. The Modernization Act reduced it to 2 percent of the first $200,000 and 1 percent of any amount exceeding that, with a minimum of $2,500 and a maximum of $6,000 is what can be charged by the lender.
If you have taken a reverse mortgage before these changes took place, you may just want to consider refinancing so that you can take the advantage of the savings. For this the lender has to document a sufficient “benefit to borrower” to grant a reverse-to-reverse refinance, but this can be done easily enough.
Generally, the counseling requirement is waived if the refinance has been within five years of the original transaction.
A reverse mortgage loan can be of immense help to the senior citizens since if you need any help after retirement to help you pay your monthly bills and you have a lot of equity in your home then a reverse mortgage as an alternative of just another home mortgage may be just what you are looking for.