House prices and reverse mortgages
Many homeowners have seen their equity drop in the last few years and it's possible that this trend will continue in the near future. What effect will the decline in the housing market have on reverse mortgages?
For those who already have a reverse mortgage, you have nothing to worry about. Many homeowners have been wondering what will happen if their home values drop too much and the reverse mortgage they have becomes more than the home's value. One of the best parts of a reverse mortgage is that once you take one out the terms of the loan cannot change. If you have a line of credit or are receiving monthly payments you will continue to receive them according to the terms of your loan. If the value of your home drops below the amount due on your loan the lender cannot come ask for more money or file any deficiency judgement in the event they lose money. Reverse mortgages have been designed to provide you security for these very circumstances.
For those who are contemplating a reverse mortgage the declining home values could pose some problems. If you are in an area that has been hit hard by the real estate downturn then there is a chance the amount of equity in your home will no longer qualify you for a reverse mortgage. With this being said, some of the hardest hit areas are places where the average home value is more than the maximum HUD limits, so it might not actually change anything for you. If you are concerned about what your county limits are or if the downturn in the market has changed whether you qualify for a reverse mortgage, you can always get a free loan analysis.
So as home values continue to fall, it does not mean that you necessarily will be unable to get a reverse mortgage. It may be that your home value is greater than the county limits anyway. There are options available, and with a little creativity and a knowledgeable loan officer you should be able to make your reverse mortgage work, even if the housing market is falling to pieces on your doorstep.
(photo by Images of Money)