The idea behind these loans has always been to help seniors in need. However, reverse mortgages have evolved so that they now have many official protections in place to make sure that borrowers are secure. In fact, the loans have turned into great financial planning tools and not just a loan of last resort. So, what is the future of these loans? Here are a few things to consider for reverse mortgages in 2017:
1. Interest Rates May Rise
In December of 2016, the Federal Reserve raised interest rates for the first time since 2009. The Wall Street Journal Reports that we should anticipate 3 more increases for 2017.
There is good news and bad news on higher interest rates. On the plus side, the Fed will only raise rates if they think that the economy is strong. On the downside, higher interest rates can decrease the amount of money seniors can borrow through a reverse mortgage in 2017.
2. Housing Prices Are High Now — Will They Hold?
The more your home is worth, the more money you can borrow with a reverse mortgage.
According to recent price information, home values are almost as high (on an inflation adjusted basis) as they were before the 2006 housing crash.
However, if interest rates continue to rise, housing prices may fall because people can borrow less money.
3. Lending Limits are Higher
For the first time in many years, the lending limit used to calculate how much you can borrow is going up. Effective January 1, 2017, the maximum claim amount is now $636,150, up from $625,500. This means borrowers with higher home values will now be able to access a higher percentage of their home equity.
4. The Need for Reverse Mortgages May Increase
There are murmurs that Social Security and Medicare may experience cuts. And, there is the case to be made that inflation will increase.
If any of these things happen, it is sure to increase the need for reverse mortgages in 2017.
5. What Impact Will the Trump Administration Have on the Reverse Mortgage Program?
President Elect Trump has proven to be hard to predict. His choice for the Department of Housing and Urban Development (the department that oversees the reverse mortgage program), Dr. Ben Carson, is one of his many surprising moves.
Neither Trump nor Carson have spoken publicly about reverse mortgages so it is unclear if they will change anything about the program or not.
6. If Economy is Unpredictable, Seniors May Increase Flexibility by Securing a Reverse Mortgage
With a new administration coming into power, we are sure to experience some unpredictability.
When the economy is erratic, smart money managers look for ways to increase financial flexibility.
Getting a reverse mortgage is one way to increase your financial options. Instead of simply being able to earn money or withdraw from existing savings, a reverse mortgage gives you another financial resource — you can “withdraw” from your home equity.
Now is a Good Time to Assess if a Reverse Mortgage is Right for You
Use a reverse mortgage calculator to find out how much money you can get from a reverse mortgage now. Or, try the suitability quiz to assess whether or not the loan is a good fit for your needs and values.
Getting a reverse mortgage now can be an excellent way to protect yourself from unpredictability. Best of all, if you qualify for a line of credit, then you can minimize the costs of this loan since you do not pay interest on the money in the line of credit, but it is available for you to withdraw if you need it.
Whatever you decide, we wish you a happy, health and prosperous 2017!