Soon after the subprime mortgage meltdown and the collapse of real estate prices, jumbo reverse mortgages exited from the market as values declined and there was a suspension in packaging the loans into securities for investors. They are now making a significant comeback.
Immense lending isn’t just creeping its way back into the traditional home loans market, but also for seniors who wish to borrow against the equity in their homes, which is known as reverse mortgages. As the economy worsens, the cost of living rises and family members lose jobs or can’t pay for school, seniors will take advantage of these reverse loans and cover the costs.
It is being reported that Urban Financial of America LLC and American Advisors Group will initiate loans for older borrowers who maintain homes that are valued higher than the $625,500 limit for debt supported by the Federal Housing Administration (FHA). Other firms have noted that they may very well modify their programs to remain competitive in this reviving market.
Home prices have risen at least 25 percent since 2012 when real estate values bottomed out. This means that homeowners who are 62 years of age or older are once again taking part in reverse mortgages. It’s understandable considering that reverse mortgages consist of some enticing marketable schemes, such as not having to pay a monthly bill and the balance and interest are only paid once the borrowers move or perish.
Some proponents of reverse mortgages present the case that they are a better alternative for seniors than selling their investments, especially if they live in extravagant homes that are worth a substantial sum.
Alicia Munnell, director of the center for retirement research at Boston College, noted that there have been a total of 18,000 reverse mortgages this year until June, which is actually down from 58,000 at the same time in 2009.
“Retirement needs have expanded and the retirement system has contracted, so more people will need to turn to their homes for income,” Munnell explained.
Indeed, if retirees need large amounts of quick cash for in-home medical care, money for their children or grandchildren and buying an investment property then seniors will turn to these larger loans. It should be noted that after the housing crash the government instituted protections that limit the amount of money received in the first year of the loan, but jumbo loans allow customers to get all their money at once.
In the end, borrowers who will likely be the most interested are those who have homes that are valued anywhere between $750,000 and $1.5 million.
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