By Tara Siegel Bernard | The New York Times
The spigot on reverse mortgages has been slowly tightened over the last several years. Borrowers can no longer tap as much of their home equity as they could before the housing crisis.
As a result, some people with heavy debt who were hoping a reverse mortgage would solve their financial problems may find that it is no longer a viable option. Under the new rules, which go into effect on Sept. 30, many borrowers will be able to get access to even less of the value locked in their home — about 15 percent less — compared to the maximum available now. The rules also put new limits on the amount of money that can be taken out in the first year, which may further deter the most distressed prospective borrowers.
“The changes really put the product on track as a long-term financial planning tool as opposed to a crisis management tool,” said Ramsey Alwin, senior director of economic security at the National Council on Aging.
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