Limits on reverse mortgages rising, tooThe other bright spot for owners of higher-priced homes is this: Reverse mortgages just became much more lucrative.
Until recently, the Federal Housing Administration had a hodgepodge of county-by-county caps on the equity you could withdraw. Typical caps were 65% of $362,790 in Seattle and $225,000 in rural Clallam County, Wash. -- even if your home was worth a million bucks.
Now, the limits are higher. In November, the FHA went to one national ceiling: $417,000. This year, to stimulate housing sales, it raised the ceiling to $625,500.
Today, if you want a reverse mortgage on your high-end house, you can get -- at age 70, for example (withdrawal amounts vary by age) -- 65% of $625,500. Even if your million-dollar house is worth only $800,000 today, you'll get more from a reverse mortgage than you would've in its million-dollar heyday.
"A lot of people are accessing much more money than they could have before the limit changes," says Jerry Dawson, a reverse-mortgage expert at Frontier Bank in Seattle.
Why can't you take out all your equity? Because there's got to be some left to pay the interest on your loan, which is what a reverse mortgage is.
Published April 27, 2009