Reverse Mortgage Loan Amount Based on Three Factors
As of last month the new law went into effect allowing reverse mortgage companies to loan based upon the new higher FHA reverse mortgage limits.
At $417,000 the new national loan limits, in most parts of the country, absolutely bury the old limits by more than twice the former amount. It's quite a boon, but how does this affect the average borrower?
Of the multiple factors entering the equation determining the value of the home, or the FHA insuraable loan limit, is of vital concern as the reverse mortgage lender uses this dollar figure and related equity as security for the mortgage.
Remember, the mortgage company uses the home's equity as the security for the loan. It will use the value or the maximum lending limit, whichever is less, as a starting point to determine how much they will allow the borrower to cash out at any given time.
Interest rates and age of the youngest senior who's name will be attached to mortgage are the other determing factors.
Intuitively, one can understand how age plays a role. Mortgage companies work similar to insurance companies in that they want to know when the borrower is "checking out". Knowing these numbers helps them make informed decisions.
The great fear is one day more will be owed than the home is worth. Clearly if the tables tell a mortgage company the borrower is going to live 4 years as opposed to 14, they will lend the older borrower far more than the younger.
Since interest accrues on a reverse mortgage, to be repaid to lender when the home is eventually sold, the lender must be careful it lends conservatively such that all of the equity isn't stripped away prior to sale. This being the case, a bank lends more when rates are lower.
The prospective reverse mortgage candidate really needs to plug in all three of these variables into the formula to determine how much money he or she will qualify to receive. There are no hard numbers.
For a rough guestimate, borrowers aged 90, would receive roughly seventy-five percent of the home's value or loan limits (the lesser of the two). The young sixty two year old would qualify at about fifty percent.
At $417,000 the new national loan limits, in most parts of the country, absolutely bury the old limits by more than twice the former amount. It's quite a boon, but how does this affect the average borrower?
Of the multiple factors entering the equation determining the value of the home, or the FHA insuraable loan limit, is of vital concern as the reverse mortgage lender uses this dollar figure and related equity as security for the mortgage.
Remember, the mortgage company uses the home's equity as the security for the loan. It will use the value or the maximum lending limit, whichever is less, as a starting point to determine how much they will allow the borrower to cash out at any given time.
Interest rates and age of the youngest senior who's name will be attached to mortgage are the other determing factors.
Intuitively, one can understand how age plays a role. Mortgage companies work similar to insurance companies in that they want to know when the borrower is "checking out". Knowing these numbers helps them make informed decisions.
The great fear is one day more will be owed than the home is worth. Clearly if the tables tell a mortgage company the borrower is going to live 4 years as opposed to 14, they will lend the older borrower far more than the younger.
Since interest accrues on a reverse mortgage, to be repaid to lender when the home is eventually sold, the lender must be careful it lends conservatively such that all of the equity isn't stripped away prior to sale. This being the case, a bank lends more when rates are lower.
The prospective reverse mortgage candidate really needs to plug in all three of these variables into the formula to determine how much money he or she will qualify to receive. There are no hard numbers.
For a rough guestimate, borrowers aged 90, would receive roughly seventy-five percent of the home's value or loan limits (the lesser of the two). The young sixty two year old would qualify at about fifty percent.
About the Author:
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posted by Debt Consolidation Loan at
10:37 PM
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