Reverse Mortgage Loan to Value – How Is It Calculated?

Each person’s situation is different so the answer will vary. However, it starts with the borrower’s age. In most cases this is the youngest borrower. It also determines the FHA reverse mortgage loan limit (in most areas $625,500) or the appraised valuation and current interest rate. This can give a borrower an idea of the maximum amount they can qualify for. HUD calls this the Principal Limit Formula. It uses a table similar to an insurance mortality table to calculate the principal limit.

The reverse loan amount may also be affected by other factors, such as whether an existing lien will be paid off and any fees associated with the loan. The borrower can choose from either the Home Equity Conversion mortgage ( HECM) Standard, or the (HECM] Saver. Each HECM has different fees and loan limits. The HECM Savings offers lower loan limits and lower Mortgage Insurance Fees, making it a popular choice for people with lower home values.

Borrowers with outstanding payments on taxes, home owners insurance, judgments, or liens against their properties will be required to repay these through the loan. Additionally, if the FHA appraiser finds that the property is in dire need of repairs, these items will be needed to be fixed or replaced in advance.

Reverse mortgage borrowers over 70 years old find they are eligible to access more of their equity. This makes the mid-70s a great time to get a reverse mortgage.

Affect HECM Home Equity Access

Age of Borrower(s).

The Value of a Home

HECM Loan Program “Standard”, or “Saver”

How does HECM mortgage net proceeds affect?

Mortgage Lien Payoff

Liens & Judgments

FHA Repairs –

Loan Fees

Reverse loan calculators provide basic estimates of how much equity a borrower has access to. These are examples of A $200,000 Home Value at Age 62 and A $200,000 Home Value at Age 75, which document both HECM.

$200,000 Value/62 Borrower Age

Fixed HECM “Standard” Max Loan $123.800

62% Value

Lien Payoff $25,000

The loan cost is $9,500

Funds available = $89,300

Fixed HECM “Saver” Max Loan $104,600

52% Value

Lien Payoff $25,000

Mortgage Cost $5,500

$200,000 Value/75 Borrower Age

Fixed HECM “Standard” Max Loan $138,000.

69% Value

Lien Payoff $25,000

The loan cost is $9,500

Funds available = $104,100

Fixed HECM “Saver” Max Loan $112,000.

56% Value

Lien Payoff $25,000

Mortgage Cost $5,500

Chris Beard helps seniors connect with National HECM-approved reverse mortgage lenders lending nationwide. Seniors over 62 can stay in their homes and enjoy financial stability through the FHA regulated, insured Home Equity Conversion Mortgage. We have access to 5 top reverse mortgage lenders across the country and can help our clients get the best terms and loan programs. To have a reverse mortgage expert review your situation, complete our quick request form. There is no obligation.

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