Last week, JPMorgan Chase announced they stopped accepting applications for Home Equity Lines of Credit (HELOC) loans. They cited the fact that rising unemployment rates could cause home values to fall. In 2008, the last time home values crashed the banks first halted taking applications for HELOCS, then they froze existing HELOC’s so clients could not access the equity promised them when getting this type of loan. At the same time, Reverse Mortgages (RM) lenders continued taking applications for their Home Equity Conversion Mortgage (HECM); which can have Lines of Credit. While traditional HELOC’s were being frozen and taken away, RM LOC’s continued paying on their Lines of Credit as promised.
The best and worst thing about a RM is the Mortgage Insurance Premium (MIP), initially it is a fee of 2% of the home value and as an ongoing basis it is .50% added to the interest rate. This makes a reverse mortgage more costly than a HELOC, but it also provides protections that a HELOC does not have; and in these uncertain times many are willing to pay more for a little certainty and protection. The MIP guarantees you can never owe more than the home is worth as it is a non-recourse loan and can only seek the investment back from the home value and not a borrower’(s) personal assets, bank accounts, etc. The MIP also guarantees the money promised at closing. In other words, if the markets were to crash and a borrower has $300,000 available on a RM LOC, this LOC continues paying; it cannot be frozen, even if the home value were to drop to $1.
In these uncertain economic times, having access to cash from the equity in your home, that can’t be frozen, may give you the peace of mind you seek. If you were to get a RM and lock in your LOC amount, you can protect some of your home equity. Life will continue on as normal, with no monthly mortgage payment required. RM borrowers are responsible to maintain home insurance, to pay their property taxes, to live in the home as the primary residence, and maintain it in proper repair. With these protections in place a homeowner may enjoy their retirement in peace, despite the goings on in the world. Perhaps you know someone that could benefit from an insured line of credit? Call today, to find out more. Click on this link to see what a reverse mortgage may do for you.
Robert Krepps, NMLS #255191, HighTechLending Inc (877) 567 – 7476 or firstname.lastname@example.org .
HighTechLending Inc, NMLS # 7147, is an Equal Housing Lender. Licensed by the Department of Business Oversight under the California Residential Mortgage Lending Act.