There are 3 main factors that are used to calculate how much a borrower can pull out of her home on an FHA insured HECM (Home Equity Conversion Mortgage) Reverse Mortgage (RM). Age, Interest Rate, & home value.
- Age – at least one of the borrowers must be 62 by the time the reverse mortgage loan funds. The older a person is, the higher the percentage of their home value they are allowed to access this loan product.
- Interest Rates – The higher the interest rate is, the less money one can access out of their equity, the lower the interest rate is, the more money one can take out using this loan. This is the factor that changes the quickest and can have a big impact on the money available on a Reverse Mortgage.
- Home Value – The home value is determined by an FHA appraisal. Of course, the higher the appraised value, the more money can be accessed. There is a cap on values of $765,600, meaning anything that appraises over $765,600 will be viewed as appraising at $765,600.
These factors are temporarily very favorable for RM paying out high amounts. First, you are the oldest you have ever been before and home values were at all-time highs in December 2019 for LA county and surrounding areas and the LIBOR index is at the lowest point since November 2018. The RM rates are based on the LIBOR index and adjust only once a week and these rates have dropped 3 weeks in a row. This is great news for those looking to get a new RM but also great news for those currently with a RM looking to refinance to get more money and lower their lifetime cap on interest; be aware that NRMLA (National Reverse Mortgage Lenders Association) does not allow their lenders to refinance a reverse mortgage sooner than 18 months from their closing date. Now is the best time in the last 2 years to be looking into a RM or refinancing your RM. If you have any questions regarding this program change or would like to see what you qualify for contact: Robert Krepps rkrepps@hightechlending.com or toll-free at 877-567-7476.
Robert Krepps, NMLS #255191, at HighTechLending Inc. HighTechLending Inc, NMLS # 7147, is an Equal Housing Lender. Licensed by the Department of Business Oversight under the California Residential Mortgage Lending Act.
