A number of changes to the HECM reverse mortgage program have taken effect today, October 2, 2017, that might impact your ability to obtain a federally insured home equity loan. The changes are in response to a recent actuarial report showing the FHA’s cost of running the program.
▪ The Mortgage Insurance Premium (MIP) that is charged at the time you take out the mortgage is now a flat 2% regardless of the amount borrowed. The MIP rate was based upon the amount that was borrowed relative to the value of your home.
▪ The ongoing annual MIP rate has been reduced from 1.25% of the outstanding loan balance to 0.5%.
▪ The total amount that you can borrow will likely be reduced because of changes in the interest rate floor from 5% to 3%. Because of this change, the average borrower, at current interest rates, will be able to borrow approximately 58% of the value of their home, down from a previous 64%.