Harbor Mortgage Solutions outlines new limits for reverse mortgages

Along with the start of the New Year comes a new break for senior homeowners over the age of 62 who are interested in tapping into the growing equity in their home through the use of a reverse mortgage.

Chris Downey, President of Harbor Mortgage Solutions in Braintree, MA outlines the new higher loan limits available for reverse mortgages. "The limits on two of the most popular reverse products available have been raised. This includes the federally insured Home Equity Conversion Mortgage (HECM), which accounts for approximately 90% of the reverse mortgages in effect in the United States, and the Fannie Mae Home Keeper reverse mortgage program."

In 2005, HECM limits were capped at $172,632 in standard cost areas and $312,895 in high cost areas. The loan limits have now been increased to $200,160 in standard cost areas, and $362,790 in high cost areas, representing an increase of over 15%.

There are no limits on the value of homes qualifying for a reverse mortgage under the HECM program. However, the amount that may be borrowed is capped by the maximum Federal Housing Administration (FHA) mortgage limit for the area, which varies geographically depending on local housing costs.

The U.S. Department of Housing and Urban Development currently calculates the FHA insured mortgage loan limits for 3,226 geographic areas within the United States. The limits will continue to vary from area to area, but all will fall within the new range of $200,160 to $362,790.

The Fannie Mae Home Keeper loan limit has also been raised from its 2005 level of $359,650 to the new limit of $417,000 for a single-family home in 2006.

"These increases present a tremendous opportunity for senior homeowners to convert more of their existing equity into tax free cash while maintaining the safety net of having a reverse mortgage insured by the Federal Housing Administration (FHA), which guarantees that the amount of the loan to be paid back will never exceed the value of the home," notes Downey.
"Further, these increases now make a reverse mortgage a viable option where it was not at the lower limits. For example, a number of senior homeowners who inquired about a reverse mortgage last year (2005) found that the former limits were insufficient to pay off their current mortgage debt. Many of those homeowners are finding that these new, higher limits are resolving that problem."

The reverse of traditional thinking
A reverse mortgage, essentially the opposite of a traditional or "forward" mortgage, can enable seniors to tap into accumulated equity without having to face ongoing payments. Unlike traditional mortgages where borrowers make monthly payments, in a reverse mortgage the cash flow is reversed, and the lender makes payments to the borrower, enabling borrowers to use the tax free cash they receive in any way that they wish.

There are no minimum income, asset, or credit qualifications to meet and no effect on Social Security or Medicare benefits. The property must be the primary residence of the borrower and properly insured and maintained, with real estate taxes kept current. As long as the borrower continues to live in the property as their primary residence, the loan can never be called.

Unlike a traditional mortgage where the balance starts high and the borrower’s monthly payments systematically reduce the loan balance, the balance of a reverse mortgage loan starts low and continues to increase as more cash is drawn and the deferred interest charges are added to the balance. Repayment is required if the home is sold, or when the last borrower permanently leaves the property, or passes away. At that time, the heirs can sell, or refinance, the property to pay off the loan.

Harbor Mortgage Solutions Offers Free Speakers Bureau
As a public service, Harbor Mortgage Solutions, along with a local Elder Law attorney, is offering to provide free speakers to help educate members of Rotary Clubs, Councils on Aging, civic organizations, church groups, and social clubs, about alternatives available to senior homeowners, including ways to unlock the equity in their homes.

Please call Harbor Mortgage at 781-843-5553 or 800-599-8700 and speak with George Downey or Chris Downey to arrange for a speaker to meet with your group and present an overview of the options available to senior homeowners.

"Use Your Home to Stay at Home"
A recent study conducted by the National Council on Aging (NCOA) set out to develop a blueprint to serve as a guide for policymakers as they explore the opportunities and limitations of tapping home equity to pay for long-term care at home. The study found that impaired, older Americans are struggling to live at home at a time when they own more than $2 trillion in untapped housing wealth.

Education is an ongoing goal, as outlined in the NCAOA report entitled "Use Your Home to Stay at Home - Expanding the Use of Reverse Mortgages for Long-Term Care: A Blueprint for Action." It is in keeping with the spirit of this report that Harbor Mortgage Solutions established its free Speakers Bureau.

Once the province of a few small banks and private lenders, the great majority of reverse mortgages today are provided through government-sponsored programs, namely the HUD/FHA Home Equity Conversion Mortgage (HECM) and the Fannie Mae Home Keeper (HK) programs.

Customized Harbor Mortgage Solutions
Specializing in conventional residential and reverse mortgages, Harbor Mortgage Solutions, Inc. is located at 100 Grandview Road, Suite 105 in Braintree, MA. George A. Downey, who is now joined by his son Christopher Downey, founded family owned and operated Harbor Mortgage Solutions in 1978.

Assisted by a staff of experienced mortgage professionals, Harbor Mortgage Solutions is dedicated to providing customized service, obtaining the best possible solution for each individual client every time. An equal opportunity lender licensed in Massachusetts and Rhode Island, Harbor Mortgage Solutions is a member of the Massachusetts Mortgage Association, the National Association of Mortgage Brokers, and the National Reverse Mortgage Lenders Association, strictly subscribing to their rigid code of ethics. Harbor Mortgage Solutions is also an Educational Subscriber of the Massachusetts Chapter of the National Association of Elder Law Attorneys.

For additional information on services offered by Harbor Mortgage Solutions please call 781-843-5553 or 800-599-8700, or visit www.HarborMortgage.com.