How do falling home prices affect reverse mortgages? Find out here how falling home prices have impacted reverse mortgages!
While reverse mortgages have always been a reliable way for retired individuals to liquidate a portion of their home’s equity, the nation’s falling home prices have drastically affected reverse mortgages in a variety of ways.
Less Banks Willing to Lend
The first way that falling home prices have affected reverse mortgages is that there are fewer banks willing to lend money. Due to falling home prices and an overall bad economy, many traditional mortgage and reverse mortgage lenders have had to cut back on their lending practices considerably. This is because they need to keep more assets in hand to ensure that their overall balance sheet stays compliant with all regulatory bodies. Because of this, a potential reverse mortgage borrower has fewer banks to choose from.
Less People Qualify
Another way falling home prices have affected reverse mortgages is that less people now qualify for reverse mortgages. To be more conservative, many lenders have increased their maximum loan to value guidelines available to reverse mortgage borrowers. This, coupled with falling home prices has cut down significantly on the amount of borrowers who even qualify for a reverse mortgage. Also, people who are approved for a reverse mortgage now have fewer funds to their disposal.
People Have to Wait Longer
The last falling home prices have affected reverse mortgages is that people now have to wait longer and until they are older to obtain reverse mortgage proceeds. While the minimum age of 62 for a reverse mortgage has stayed the same, more people have to wait until their 70s until they can be approved for a reverse mortgage. This is because the gross proceeds available are less and the lender wants to ensure the proceeds will last for the borrower’s entire life.
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