With Reverse Mortgages being such a hot topic in the mortgage world, it's hard to believe that anyone would caution against them. However, a recent Wall Street Journal report believes that the attraction to standby Reverse Mortgages could decline.
The concern comes after the new federal rules that increased costs for some homeowners looking for a Reverse Mortgage option. Jeff Brown of the Wall Street Journal questioned whether or not a reverse mortgage was still worth considering.
"That type of reverse mortgage 'is a much less appealing option moving forward,' says Jamie Hopkins, associate professor at the American College of Financial Services in Bryn Mawr, Pa," according to the report.
Why? Well, the report points out significant changes that have be enacted as of October 2. It revolves around the reduction of the Principal Limit Factor.
"As of Oct. 2, the maximum loan amount, called the Principal Limit Factor (PLF), was reduced, so that an applicant who might have been allowed to borrow 60% or 70% of the property’s value in the past, will now get something less," according to the report.
"The exact amount will vary by borrower because limits are based on the applicant’s age and loan rates, as well as property value."
The report finds experts urging those looking into reverse mortgages, not to get it "until they actually need it."
For more details on why standby Reverse Mortgages may take a hit, click on the image above.