According to a recent article in the NYTimes, Americans thinking about a “reverse” mortgage have more clarity, and possibly, more access to the remaining equity in their homes in New York.
Reverse mortgages allow borrowers who are 62 or older to tap into their homes’ equity without having to repay the loan on a monthly basis. A “reverse” mortgage is a loan against your home that you do not have to pay back for as long as you live there. With a reverse mortgage, you can turn the value of your home into cash without having to move or to repay the loan each month. No matter how this loan is paid, you typically don’t pay anything back until you die, sell your home, or permanently move out of your home.
To encourage this planning device, the president signed legislation raising the outside loan amounts on reverse mortgages, which are to be guaranteed by the federal government. By raising the limits and changing the laws to premit coops to be considered, Congress is trying to give older homeowners access to more of the equity left in their homes, provide stricter consumer protection, and offer co-operative (“co-op”) owners the chance to apply for reverse mortgages.
Under the new laws, mortgage counsellors will have to take tests to show they understand the products, costs will be capped, and coops will be eligible.
The bottom line: be careful and understand the product before you agree to a reverse mortgage in New York.