Reverse Mortgage Credit Line to Grow Slower Following Rule Changes
The changes that took effect after October 2 now have reverse mortgage experts worried about credit line growth. According to a recent report, experts believe that the credit lines could grow at a slower rate for Home Equity Conversion Mortgages due to the new principal limit factors and annual insurance premiums.
"Wade Pfau, professor of retirement income at the American College of Financial Services in Bryn Mawr, Pa., has been re-running his numbers to project what the changes might look like," according to Reverse Mortgage Daily.
"His projections show that, under the new rules, a 62-year-old with a $250,000 home can take out a $102,500 line of credit, down from $131,000 before the changes. In 30 years, the LOC would grow to $383,895 under the new rules, as opposed to $608,043 under the old regulations."
While there is still growth, it has been significantly altered judging from Pfau's calculations. According to the report, Pfau believes that initial costs and lender's margins will be crucial in determining whether the LOC is a viable option for the client.
To learn more about the effects on the line of credit following the October 2 changes, click on the image above.