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.
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.
When determining how much money a bank will actually lend to a prospective borrower, it uses the home's value or the lending limit, whichever is less, as a basis for the actual number. The borrower receives no benefits if the home value is in excess of the FHA lending limits.
Don't forget, the lender is using the house and it's equity as security for the mortgage. The value of the home, or the FHA insurable limit, is the first and most important determination as to how much a borrower can receive.
Two other important factors go into this determination: Interest rate and the youngest borrower's age.
It probably comes as no surprise but reverse mortgage companies use actuarial tables. Yes, it may seem cruel but knowing how long the borrower is going live helps them determine the dollar figure to lend. Age is the next most important factor.
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.
Interest rates are thought of in a similar manner. The greater the interest rate, the quicker the accrual of interest will eat away at the security for the mortgage. Therefore, lenders lend more to prospective borrowers as rates go down than the vice versa.
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.
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.
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.
When determining how much money a bank will actually lend to a prospective borrower, it uses the home's value or the lending limit, whichever is less, as a basis for the actual number. The borrower receives no benefits if the home value is in excess of the FHA lending limits.
Don't forget, the lender is using the house and it's equity as security for the mortgage. The value of the home, or the FHA insurable limit, is the first and most important determination as to how much a borrower can receive.
Two other important factors go into this determination: Interest rate and the youngest borrower's age.
It probably comes as no surprise but reverse mortgage companies use actuarial tables. Yes, it may seem cruel but knowing how long the borrower is going live helps them determine the dollar figure to lend. Age is the next most important factor.
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.
Interest rates are thought of in a similar manner. The greater the interest rate, the quicker the accrual of interest will eat away at the security for the mortgage. Therefore, lenders lend more to prospective borrowers as rates go down than the vice versa.
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.
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.
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