New Rules for Reverse Mortgages Go In Effect September 30

If you are thinking about getting a reverse mortgage, you had better act quickly. I have written previously about the potential dangers of a reverse mortgage. http://notjustforboomers.blogspot.com/2012/10/boomers-beware-reverse-mortgages-can-be.html
Reverse mortgages allow homeowners over the age of 62 to tap their home equity without having to make any payments on the amount borrowed. The lenders get their money back when the house is sold. The Federal Housing Administration (FHA), which insures most reverse mortgages, is issuing new rules, effective September 30, 2013 that may make it difficult for borrowers to get as much value from their home's equity as they were able to do previously..

The new rules will limit the available equity by about 15%.  In other words, in taking money from a reverse mortgage, the homeowner will not be able to tap as much of the equity as before. The new FHA rules also limit the amount of money that can be taken out during the first year of the mortgage.

Other key changes are:  (1) the price of the mortgage will now be based upon the amount withdraw; (2) lenders will be required to make a financial assessment of the borrower to make sure he or she can make the necessary insurance and tax payments; and (3) if the lender determines you may not be able to pay those premiums or taxes, the borrower may be required to set aside money to insure those payments are made.

As can be seen, these new rules change the entire landscape for reverse mortgages. If you are still interested in pursuing a reverse mortgage, make sure you investigate and understand these changes.