The amount that homeowners can borrow with a reverse mortgage has been reduced by 10% by the Federal Housing Administration. The new rule applies only to reverse mortgages obtained after October 1, 2009. If you took out a reverse mortgage before that date, you won’t be affected. But if you want to take out a new FHA-insured reverse mortgage, the maximum amount you can borrow will be 10% less than it was.
In a traditional mortgage, you borrow money against your house and pay it back in monthly installments over time. With a reverse mortgage, you borrow money against your house, but you don’t have to pay it back until you die, sell the house, or move, which means you don’t owe anything as long as you stay in your home. In most cases, you must be at least 62 years old to qualify.
Due to a roughly $800 million government shortfall, the FHA announced that it will tighten its borrowing limits. This means that a significant number of people won’t be able to borrow enough with a reverse mortgage to pay off the existing mortgage on their property.