The Florida Estate Planning and Probate Law Blog is focused on recent federal and state case law and planning ideas.

2017 CHANGES TO THE REVERSE MORTGAGE PROGRAM

Effective October 2, 2017, new rules go into effect for federally backed HECM (Home Equity Conversion Mortgage) reverse mortgages. The good news is that the new rules will only impact new borrowers. A reverse mortgage allows an individual over age 62 to borrow against the equity in their home without being required to pay back the loan until they either move, sell the property or die. For many seniors, a reverse mortgage provides them a means to generate funds in retirement. The new rules will increase the upfront cost of the reverse mortgage to 2.0% (it previously was 0.5% for those receiving less than 60% of their home equity and 2.5% for those borrowing more than 60%). The new rule will also decrease the annual premium from 1.25% to 0.5% of the outstanding mortgage balance. The amount that may be borrowed will remain linked to the age of the borrower and prevailing interest rate. At current interest rates, the average borrower is able to borrow approximately 58% of the value of the home, down from 64%. The new rules are necessitated by the continuing deficits in the federal reverse mortgage program.