This is the question we are asked most often. And the answer is, quite honestly – “it depends”.   And it depends on so many things — it is not just math. Reverse Mortgages are themselves increasingly complicated –  There is no “standard” nor “one size fit all”.   We generally approach conversations about Reverse Mortgages in three steps:
  • Does the math make sense?
  • Does the home qualify?
  • Does the borrower qualify under financial assessment?

So let’s begin: The math for the Home Equity Conversation Mortgage (HECM) loan differs from the proprietary loans. But for both types of loans we need to know:
  • The age of the youngest borrower on title to the home (and we need exact birth dates)
  • The qualifying interest rate for the type of loan requested.
For HECM loans, the lesser of:
  • The value of the home based upon a current appraisal
  • The national lending limit currently set by HUD at $822,375.
So specific information is needed to be able to tell you how much you may qualify for – called the “Principal Limit”. For HECM loans, the Principal Limit will be the same for all lenders offering the exact same type of loan. But in this ever–changing market, the exact same loan is less common. To determine funds available to you, we must also subtract any existing mortgages and liens which need to be cleared. And we must subtract loan closing costs.  That is just the math – the first bullet way above.

Does the home qualify?

An appraisal by a specially licensed appraiser is required. The appraiser not only inspects the property to prepare an opinion of value, he also needs to inspect your home for items of safety and security since it is likely this may be your home as you continue to age. If the home needs substantial improvements to ensure that your home is safe and secure for you to successfully age in place, then the cost of the improvement will need to be included in the calculations.  Some repairs may be required before the loan can close; others can be accomplished within the first 6 to 12 months. Monies are usually “set aside” to ensure there are sufficient funds to pay for the repairs. Therefore, those set-aside funds are not available to the borrower until all repairs are complete.

Does the borrower qualify under financial assessment?

To ensure that you can afford to continue to meet your obligations, such as property taxes, insurance and maintenance, we must perform a “financial assessment” evaluating your “willingness” and “capacity” to continue to pay your obligations as you remain in the home. If you have not been paying your past obligations timely,  you may be required to have another type of set aside call “Life Expectancy Set Aside” (LESA) which holds money to pay taxes and insurance and therefore limits the funds available to you.
AHAH – many factors affect “How Much Can I Get???” Perhaps it’s a bit clearer why we frequently say “it depends”.