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Declining Home Values - What Effect Will It Have On Reverse Mortgages?
Homeowners across the country are feeling the pressure of a decling housing market. What effects do the decline in home values have on your Reverse Mortgage or your chances of getting one?
Many homeowners have seen their equity drop in the last year and it's likely that this trend will continue in the near future. The question you may be asking yourself, and the question we are being asked quite often lately, is what effect the decline in the housing market will have on Reverse Mortgages. This question really actually breaks down into two seperate questions and they are both very important to those concerned. The first question here is what effect the declining home values will have on those trying to get a reverse mortgage, and the second question is what the effect will be on those who already have a reverse mortgage. Lets look at both these questions to see what this housing debacle might mean to you.
First things first, for those who already has a Reverse Mortgage, you have nothing to worry about. Many homeowners have been contacting us asking about what will happen if their home values drop to much and the reverse mortgage they have becomes more than the homes value. One of the best parts of a reverse mortgage is that once you take one out the terms of the loan cannot change. If you have a line of credit or are receiving monthly payments you will continue to receive them according to the terms of your loan. If the value of your home drops below the amount due on your loan the lender cannot come ask for more money or file any deficiency judgement in the event they lose money. Reverse Mortgages have been designed to provide you security for these very circumstances.
For those who are contemplating taking out a Reverse Mortgage the declining home values could pose some problems. If you in an area that has been hit pretty hard by the real estate downturn then there is a chance the amount of equity in your home will no longer qualify you for a reverse mortgage. With this being said, some of the hardest hit areas are places where the average home value is more than the maximum HUD limits anwyays so it might not actually change anything for you. If you are concerned about what your county limits are or if the downturn in the market has changed if you qualify for a Reverse Mortgage you can always get a free loan analysis.
Another issue that becoming more common is that homeowners at risk of foreclosure with little equity in the property are able to do what's known as a "short refinance" to allow the homeowner to qualify for a Reverse Mortgage. What this means to you is that even if you think you don't have enough equity in your home you may be able to work out a deal with your lender to allow you to pay less than you owe in order to get into a Reverse Mortgage. You may be asking yourself why a lender would be willing to do this and the answer is quite simple, it's cheaper for the lender. Instead of going through all the costs of foreclosing, it is just simply easier for the lender to forgive part of the loan inorder to quickly get their money back.
So as home values continue to fall it does not mean that you are unable to get a Reverse Mortgage. It may be that your home is more than the county limits anyways, or it may be that your lender is willing to forgive some of the loan balance in order to help you out either way there are options available and with a little creativity and a knowledgeable loan officer you should be able to make your Reverse Mortgage work, even if the housing market is falling to pieces on your doorstep.