Return of the Non-FHA Reverse Mortgages are Right here!
If you’re looking for a loan that can convert your home equity into cash flow or a line of credit for retirement, you probably have the option reverse mortgage.
But the reverse mortgage isn’t one size fits all, and what many people don’t realize is that there are several products to choose from, both of which are below the popular one Home equity conversion mortgage (HECM), as well as private loan options.
For the past several years, the number of reverse mortgage products on the market has been limited to the federally insured HECM and a very small handful of other loans for people with a home value of around $ 600,000 or more.
However, recent changes to the Federal Housing Administration’s HECM mean that some lenders have the opportunity for new jumbo reverse mortgages This gives borrowers even more options to use their home equity in retirement.
Two reasons. First, the FHA could soon be less competitive with the private market due to the credit limits set by the federal government. And second, FHA has recently changed its rules for reverse mortgages.
Credit limits. FHA places a limit on the lender partners who can lend through their insurance programs.
Historically, this level has been capped at $ 417,000 for reverse mortgages.
During the housing crisis, however, when private market lending was largely restricted, the government decided to raise the approxp to $ 822,375.
This made government home loans more attractive to homeowners of all different property values. This also made it difficult for private lenders to compete.
The credit limit hike is temporary, however, and reverse mortgage lenders see the point when credit limits return to their historical levels as an opportunity to offer more products to borrowers whose homes are rated above the FHA credit limit.
What is the difference?
As with any FHA insured loan, a HECM reverse mortgage falls under government requirements for the purpose of making the loan and then providing services to the borrower throughout the life of the loan.
For example, FHA only insures certain types of property. If you live in a prefabricated house or a cooperative, you likely don’t qualify for an FHA reverse mortgage.
A private loan can provide more options for the borrower as it is not bound by government rules.
It also creates more competition in the market, which gives borrowers even more choices.
When will the new loans be available?
Currently, very high home value borrowers can access at least one non-FHA reverse mortgage option.
However, several other lenders have announced that they will offer private reverse mortgage products in 2014.
When looking for a reverse mortgage, keep in mind that the HECM is just one type of reverse mortgage.
It can help retirees increase cash flow, protect against market risk, or simply provide a line of credit for retirement emergencies. But there are other options worth exploring as well.
Are there reverse mortgages without an FHA?
Yes, there are. They’re usually called jumbo, private, or proprietary reverse mortgages, and they have different policies than HUD and usually larger loan amounts.
What Are the Interest Rates on Non-FHA Reverse Mortgages?
These vary depending on the program and type of loan. There are fixed rate loans and variable rate loans available, but when you consider the need for mortgage insurance, the prices are competitive on the additional property types / values that they can accommodate.
How Do I Find a Non-FHA Lender?
To find a non-FHA lender / reverse mortgage loan, you should search the terms “Own reverse mortgage”, “Jumbo Reversal Mortgage” and “Private Reversal Mortgage”.
What is HUD’s involvement in reverse mortgages?
HUD is not a lender but insures the loans with a mortgage insurance premium that protects borrowers, lenders and investors. HUD does not take over or finalize the loan, the lender does but must do so as per HUD requirements to be eligible for mortgage insurance.
What are the different types of reverse mortgages?
There are the standard HUD or FHA insured loans as well as the jumbo or proprietary reverse mortgages. Jumbo / Proprietary Reverse Mortgages are both private programs that do not require mortgage insurance, and HUD and private programs can be used to refinance existing real estate or to buy new homes.
ARLO recommends these helpful resources: