Breaking Down Reverse Mortgage Cash Out to Borrower
The big housing bailout bill, signed July 30, also raised FHA national lending limits. In November, lenders began closing loans with the new limits.
The FHA lending limit serves as a cap on the value of a home from which a reverse mortgage lender uses as a basis or starting point to determine how much money it will actually lend to the senior borrower.
One could liken the lending limit to the actual value of a home and as a starting point to determine how much money the lender will actually allow the senior to borrow. If the value of the home exceeds the lending limit ($417,000), the borrower receives no additional benefit.
The reverse mortgage lender uses the FHA limits or value of the home as security for the money loaned to the senior. This value, determined by a licensed FHA appraiser, is a critical element.
Interest rates and age of the youngest senior who's name will be attached to mortgage are the other determing factors.
Age makes sense right? Let's face it, reverse mortgage lenders are using actuarial tables, just like insurance companies, to determine how long the borrower will live in the house.
Forward lenders today have the serious problem of more being owed than the home is actually worth. Reverse mortgage companies fear the exact same problem on the tail end of these mortgages. Therefore the borrower, who will likely pass on earlier rather than later, will be loaned more money.
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.
To get a true determination a borrower should contact a licensed reverse mortgage company. People want hard answers, but the reality is there aren't any until all the variables are plugged in.
Without the formula we can only take a good guess. Today the oldest borrowers will get seventy five to eighty percent of the value of the home. The youngest ones, about fifty percent.
The FHA lending limit serves as a cap on the value of a home from which a reverse mortgage lender uses as a basis or starting point to determine how much money it will actually lend to the senior borrower.
One could liken the lending limit to the actual value of a home and as a starting point to determine how much money the lender will actually allow the senior to borrow. If the value of the home exceeds the lending limit ($417,000), the borrower receives no additional benefit.
The reverse mortgage lender uses the FHA limits or value of the home as security for the money loaned to the senior. This value, determined by a licensed FHA appraiser, is a critical element.
Interest rates and age of the youngest senior who's name will be attached to mortgage are the other determing factors.
Age makes sense right? Let's face it, reverse mortgage lenders are using actuarial tables, just like insurance companies, to determine how long the borrower will live in the house.
Forward lenders today have the serious problem of more being owed than the home is actually worth. Reverse mortgage companies fear the exact same problem on the tail end of these mortgages. Therefore the borrower, who will likely pass on earlier rather than later, will be loaned more money.
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.
To get a true determination a borrower should contact a licensed reverse mortgage company. People want hard answers, but the reality is there aren't any until all the variables are plugged in.
Without the formula we can only take a good guess. Today the oldest borrowers will get seventy five to eighty percent of the value of the home. The youngest ones, about fifty percent.
About the Author:
An excellent resouce for Texas reverse mortgage guidebook of answers click this link. Additional information and a reverse mortgage calculator for Texas is here.
posted by Debt Consolidation Loan at
10:41 PM
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