New Reverse Mortgage Limits - How Much Will You Cash Out?
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 new limits in most parts of the country are $417,000. This is an increase by as much as two times in many of these same areas. So, what does this mean?
Of the multiple factors entering the equation determining the value of the home, or the FHA insuraable loan limit, is of vital concern as the reverse mortgage lender uses this dollar figure and related equity as security for the mortgage.
Remember, the mortgage company uses the home's equity as the security for the loan. It will use the value or the maximum lending limit, whichever is less, as a starting point to determine how much they will allow the borrower to cash out at any given time.
The other vital derminants of the cash out amount are the age of the youngest borrower and interest rates.
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.
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 new limits in most parts of the country are $417,000. This is an increase by as much as two times in many of these same areas. So, what does this mean?
Of the multiple factors entering the equation determining the value of the home, or the FHA insuraable loan limit, is of vital concern as the reverse mortgage lender uses this dollar figure and related equity as security for the mortgage.
Remember, the mortgage company uses the home's equity as the security for the loan. It will use the value or the maximum lending limit, whichever is less, as a starting point to determine how much they will allow the borrower to cash out at any given time.
The other vital derminants of the cash out amount are the age of the youngest borrower and interest rates.
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.
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.
About the Author:
A great spot for Texas as well as anywhere for reverse mortgage answers click this link. Additional information and aa Texas reverse mortgage guide is dowloadable here.
posted by Credit Counseling at
10:37 PM
0 Comments:
Post a Comment
Subscribe to Post Comments [Atom]
<< Home