HECM Reverse Mortgage Loan Limits for 2016
Recently, I had the pleasure to welcome a lovely couple to my office where we discussed options in obtaining financing. They have been married since their 20s and have had a remarkable, long life together. The couple was facing a problem that demanded their full attention—the wife was recently diagnosed with cancer.
While not the first time I had an opportunity to help a couple facing a medical emergency, this time I could see more easily than others how damaging this was to her husband. They needed money to cover the cost that the insurance company required. We discussed their assets and liabilities and determined that their best option was to receive a cash infusion from a reverse mortgage.
As I began explaining the concept of a reverse mortgage, the husband seemed to brighten up, having a sparkle in his eyes. To begin, we discussed the foundation of a regular mortgage. Using their home as an example, I provided that a regular mortgage is a financial product that requires the homeowner to pay a fix amount of money per month over the course of several years, usually 20 or 30, for a loan to purchase their home.
After those 20 or 30 years, the couple owned their home, effectively making them “house rich but cash poor.” A reverse mortgage is similar to a traditional mortgage except these products differ because for the former you pay the lender, while for the latter, the lender pays the couple. The financial product is ideal for seniors aged 62 and over who are looking for additional capital.
How the product works is that if the candidate surpasses the age limit, they can obtain a capital infusion in the form of a monthly payment over a specified time; or as a line of credit to use on an as needed basis, which also offers the option of having a single lump-sum payment. For most borrowers, according to a 2006 AARP study, “found that borrowers more frequently chose the line of credit option, and many borrowers withdrew a large amount of loan proceeds early in the loan term.” Each financial payout option has their own pros and cons that we discussed at length, pertaining to their specific financial situation that I will not discuss in this article for privacy reasons.
A specific point that I did bring in with the couple was the importance of using solid financial management of the proceeds they would receive. While a traditional mortgage includes escrows for homeowners insurance and property taxes, a reverse mortgage does not; thereby making the loan recipient only as effective as their financial specialist providing the advice. One of the benefits of working with our company is that we are fully transparent; we shop different companies for you; the client receives 100 percent free consultation; the cash received can be used however you prefer; no more mortgage payments will be due; entitlement programs are typical not affected; and the funds are not considered income and are not taxable.
An additional benefit that the couple provided from having worked with our company is the peace of mind in knowing that we provided everything they needed to know in relation to using the product wisely. They were lucky because their property fell just short of The Federal Housing Administration’s Home Equity Conversion Mortgage loan limit—by about $70,000 dollars. For the period of Jan. 1 to Dec. 31 of 2016, the maximum claim amount for Federal Housing Administration Insured Home Equity Conversion Mortgage is 150 percent of Freddie Mac’s national conforming limit of $417,000, which is $625,000. This is important when deciding if a reverse mortgage is right for the client.
In conclusion, the couple story ended on a happy note. They obtained the funds to obtain chemotherapy for the wife who survived the cancer. Their currently using the remaining proceeds to visit their children who have families of their own in various states. The husband was extremely thankful by my work and often tells others of the financial experience. On a side note, when the couple chooses to leave their home, that is when the funds—including interest—are repaid to the lender.
If you are interested in obtaining a reverse mortgage, reach out to one of our specialist by calling (888) 547-8308. Their hours are Monday to Friday, 9 a.m. to 8 p.m., and Saturday to Sunday, 12 p.m. to 3 p.m. EST. When speaking with one of our specialists, you can find out if you qualify and ask a wide range of questions that our specialists are more than qualified to answer. To obtain more information during non-working hours, visit our learning center where you can read other recent blog posts or check out our FAQs page.