How Much Money Can I Get with a Reverse Mortgage?
“How Much Money Can I get with a Reverse Mortgage?” Is usually one of the very first questions I hear from people thinking of doing a HECM Reverse Mortgage.
The answer varies greatly depending on each person’s specific scenario. Without some detail on the homeowner’s situation it would be impossible to give a reliable answer to this question. The many factors that affect Reverse Mortgage figures include:
- Interest Rates
- Credit History
- Home Value
- Current Mortgage Balance
- Loan Type
- Closing Costs
As you can imagine every person will have a unique answer to these questions. The best I can offer are ballpark figures of what’s available if you’re considering a Reverse Mortgage.
Reverse Mortgages are structured based on the age of the youngest borrower on the mortgage. For example, if the husband is 77 and the wife is 74, the affective age for the mortgage is 74. The exception to this rule is when the loan will close within six months of the next birthday. When this happens the affective age is based on the next birth date or 75 in our example.
The Interest Rate of a HECM Reverse helps determine the loan amount. This is true because over time lower rates add less to the loan so banks will lend more upfront. The opposite is true of higher rates, when rates are higher banks lend less because the loan will grow faster.
As of April 2019 Reverse Mortgage Interest Rates are doing great and are about as low as I’ve ever seen. Low Rates and high property values mean now is a great time to maximize HECM Reverse Mortgage benefits.
Credit History is not as big of an issue on Reveres Mortgages as it is on Forward Mortgage. But in situations where there have been late payments within the past 3 years the lender may require a LESA or Life Expectancy Set Aside. The LESA is similar to an Escrow account. It’s where we reserve a portion of the equity for taxes and insurance for an extended period, (usually 15-20 years). This reserve could reduce your available funds by $10,000-$40,000 or more depending on your specific property expenses.
Home Value/Mortgage Balance
When doing a Reverse Mortgage the first priority is using a portion of the home’s equity to pay off the existing mortgage if there is one. The borrower is allowed to use any remaining available equity from the loan as they wish. So of course higher values and lower balances provides more available money to the homeowner.
Reverse Mortgages are typically structured as a traditional Fixed Rate or the Growth Line of Credit. Each option has it’s Pros and Cons so the right choice depends on your specific needs. Normally the Growth Line of Credit offers more money to the homeowner under more flexible terms.
Closing costs are usually comparable from lender to lender but you may find some fluctuation in the Discount points/Origination Fees. It’s wise to do some shopping before you pull the trigger to make sure you’re getting a great deal. But a Strong Word of Caution, never choose your lender based on Costs alone. Working with a true HECM Reverse Mortgage Professional will mean the difference between loving or hating your new mortgage. Don’t make the mistake of choosing the lowest priced lender. You’ll likely end up paying far more down the road for this bad decision.
So What is the Figure?!
All of the details I’ve outlined go into determining the maximum Loan Amount of a Reverse Mortgage. Without knowing your details, the best Ballpark answer I can give is that based on your age the loan amount is roughly:
- 40% of the appraised value at age 60
- 50% of the appraised value at age 80
- 60% of the appraised value at age 90
Keep in mind that these numbers can be a lot better based on interest rates. My top recommendation would be to Email or Call Me to see how much money you can get. A Reverse Mortgage Consultation can be done in just 10-15 minutes.
President – Reverse Mortgage Specialist
Heritage Reverse Mortgage
Heritage NMLS #1497455 Trevor’s NMLS #: 267962
1060 South Main Street Bldg. A Suite 101B
St George Utah 84770