FHA Rule Change Expands Reverse Mortgage Options
The Federal Housing Administration (FHA) recently updated its rules to make it easier for buyers and owners of condominium units to access FHA financing. The change, which went into effect earlier this month, opens up new possibilities for homebuyers and creates a new avenue for seniors interested in taking advantage of a Home Equity Conversion Mortgage (HECM).
Aging in Place
One of the features of a HECM, or reverse mortgage, is its potential to support an individual’s plan to age in place. Available to homeowners over the age of 62, a reverse mortgage provides an opportunity to end mortgage payments and instead access the equity in a home. The borrowers can then remain in the home as long as they maintain it and continue to pay property taxes and insurance premiums. Repayment of the HECM becomes due when they pass away or otherwise stop using the property as their residence.
Owners may use a reverse mortgage to supplement their financial planning in retirement, and many consider using the funds to make aging in place a more comfortable and seamless experience. Improvements to the safety or accessibility of a home can address the challenges faced by seniors. Similarly, more substantial upgrades, such as adding private guest facilities, could support a retirement budget with rental income or make a live-in caretaker a more realistic option.
Condos Now Eligible
Among the restrictions governing a HECM is that they are only available on FHA-approved properties. Eligibility rules previously required that the entire condominium project have FHA approval, and with only 7 percent of the U.S. condos meeting that criteria, many seniors were shut out from the opportunity. This month’s rule change allows single-unit condos to be considered for FHA approval, regardless of the status of the rest of the building.
Condo owners who were considering a reverse mortgage as part of their future financial plan may now be able to avoid having to choose between their current home and the flexibility of a HECM. The new rule also expands the options for seniors who may have dismissed a condo purchase due to the previous limitations it could have had on their reverse mortgage eligibility.
To find out if a reverse mortgage can help you reach your retirement goals, visit OpenMortgage.com. Our loan origination specialists stay informed with the latest industry developments to serve you better. Call today.