Are you looking for a way to take advantage of the equity in your home?
If you’re an older homeowner in need of additional income, the HUD program to convert home equity into cash could be an option for you.
However, you should be aware of the most recent changes in order to gain the maximum advantage from this program. Recently there was a huge overhaul that everyone should know about, whether they’re currently a part of the program or looking to borrow.
If you’re interested in how to get back that equity that you’ve built up over years of making mortgage payments, then keep reading.
This article will explain all the changes to HUD real estate loans that you need to know.
HUD Real Estate and HECM Changes
The Home Equity Conversion Mortgage (HECM) is also known as a reverse mortgage and allows senior homeowners to tap into the equity in their home. If you are 62 years of age or older, you can benefit from this type of a loan.
Recently the amount generated from the fund has been in decline, leading to changes in the program. HUD announced that it will increase premiums and tighten lending limits on these types of mortgage products.
The goal of the new requirements is to prevent HECM borrowers from missing their property tax and insurance payments. These changes will only apply to new loans, so current borrowers are not affected.
Increase in the MIP
The MIP (mortgage insurance premiums) on HECM accounts will rise to from 0.5 percent to 2 percent of the maximum claim amount at the time of origination. These new figures will apply for all loans without regard to the initial draw amount.
As a result, upfront costs to most borrowers will be increased, but there will be lower premiums over the life of the loan.
If the initial draw amount on the loan is greater than 60 percent, the premium will drop from 2.5 percent to 2 percent during the first year.
Additionally, for those who borrow more than 60 percent of the amount they can take on the home in the first year, they currently pay 2.5 percent upfront. For this group, premiums will actually decrease slightly.
PLF Also Revised
Effective October 2, 2017, principal limit factors (PLF) will change. The PLF provides what the percentage of the maximum claim amount allowable in cash draws is for seniors participating in the program.
The changes reduce this percentage, and HUD sets out the comprehensive new list in a table.
This change effectively means the amount seniors can access will decrease. Previously, it was about 64 percent of the home’s value, and it will now be 58 percent, a decline in lending ratios of about 10 percent.
How to Benefit from a HUD Program Now
The opportunities offered by HUD real estate loans could be the source of your next big payday. To take advantage of the benefits that HUD offers though, you need to work with expert real estate professionals.
Get in touch with us today to find out if you’re eligible for a reverse mortgage loan.
7th Level Mortgage is a leading one-stop mortgage company providing deeply informed, custom-tailored assistance with every phase of each mortgage transaction. If you are searching for a home loan in New Jersey, Pennsylvania, Delaware, New York, or Florida, please contact us today so that we can determine the best Mortgage Lender to place your loan with and get you the best possible rate and program.