Changes Coming to Reverse Mortgage: What You Need to Know
Open Mortgage is committed to keeping all of our customers up to date on today’s reverse mortgage environment. Recently, The Department of Housing and Urban Development (HUD) announced changes to both the Reverse Mortgage Initial Principal Limit (“PL” – the amount you are able to borrow) and the Mortgage Insurance Premium (MIP). These changes have an important impact on future reverse mortgages.
Announcements from HUD: Starting October 2nd, 2017
HUD has announced several changes to reverse mortgages that borrowers may need to factor into their decision regarding reverse mortgages. These changes include:
- Initial MIP Raise from 0.5% to 2% for Draws Under 60% – Mortgage insurance premiums are set to rise from their current rate of 0.5%, to a rate of 2% for all reverse mortgage draws under 60%. This means that for many borrowers, fees will rise slightly for their initial draw. All claim amounts over 60% will see their MIP lower from its current rate of 2.5% to the 2% number.
- Annual MIP Drops from 1.25% to 0.5% – While initial MIP may be on the rise, annual MIP rates are dropping. HUD announced a drop in annual MIP from 1.25% of the loan balance to 0.5% annually. This change will reduce annual fees by several thousand over the course of the loan, and should help save money over time.
- Reduction in Principal Limit – HUD has changed the principle limit percentage that borrowers may receive. This number depends on your age. Those that are 62 used to be able to take 52.4%, but can now receive only 41%. Those that are 72 can receive 46.7% instead of 49.1%. The limit rises with age, but has still dropped roughly 6 to 12 percentage points.
Overall, these changes may have a significant impact on the value of your reverse mortgage. That is why it now makes more sense for those that have been on the fence about obtaining a reverse mortgage to contact their loan originator right away.
Our team will take a look at your numbers and see if it makes sense to expedite your loan before the changes go into effect. If you already have a loan originator you have been working with, or you’d like to speak with one soon, please contact Open Mortgage right away.