The government is changing the loan’s insurance costs and reducing how much applicants can borrow—and the window for borrowing under the old rules is closing fast.
In a surprise move, the government is changing the reverse mortgage rules again. And the changes, which affect the cost of insurance and borrowing limits, are a mixed bag for borrowers.
Upfront mortgage insurance premiums will be a flat 2% for every loan, a change that means some applicants will pay more, while others will save. If you qualify to take up to 60% of the eligible loan amount in the first year with the remainder available the following year, your upfront cost will rise one and a half percentage points from the previous 0.5%. For those who qualify to take more than 60% in the first year, generally because of an outstanding mortgage that must be paid off, the upfront cost drops by half a point, from 2.5%.
Ongoing insurance costs will drop for all borrowers, with the annual premium falling from 1.25% to 0.5%. “Over time, that could have a significant impact,” says Peter Bell, president of the National Reverse Mortgage Lenders Association. For every $100,000 in loan balance, you’ll save $750 a year. The lower ongoing cost may offset much or all of the higher upfront cost.
When it comes to saving for retirement, maybe you’ve done everything right. You started early, maxed out your 401(k) plan, invested in a diversified portfolio and avoided costly mistakes, such as cashing out your retirement plan. Fantastic. But now comes the hard part: making sure you don’t outlive your money.
Between Facebook, iTunes, email and digital banking and investment accounts, most of us lead pretty active lives online. Do you have a plan for what will happen to all your passwords and accounts when you pass away?
You know the old saying about failing to plan means you’re planning to fail. The same goes for retirement. If you don’t make a plan, you may never get to retire. And if you don’t have a vision of what your retirement years will look like, you’ll likely drift through your senior years … and then wonder where they went.
Do you know how long your current retirement savings will last? Most American households have far less than they need for retirement. According to a study by the National Institute on Retirement Security, “62% of working households ages 55-64 have retirement savings less than one times their annual income, which is far below what they will need to maintain their standard of living in retirement.”