The percentage of your home’s equity that is available to an individual for a reverse mortgage depends on several factors. HUD uses a calculator to determine
benefits for each borrower that takes into consideration the ages of the borrowers, the interest rates at the time the loan is originated as well as the value of the
home or the HUD lending limit whichever is less.
Since borrowers can stay in their homes for life and never have to make a payment on the loan, the calculator takes all these factors into consideration to determine
the amount the borrower will receive in their Principal Limit, or maximum available loan amount.
When considering jumbo or
proprietary programs, those products
often use the same considerations but are subject to the requirements of the investors who offer the programs rather than HUD numbers.
In short, it is very difficult to publish Percentages or “Loan to Values” that are available simply because they change as the factors change. Older borrowers
receive more money than do younger borrowers since with a shorter life expectancy, they are not liable to remain in the home as long and accrue as much
interest on the home.
With today’s interest rates, borrower receive more money because they do not accrue interest as rapidly.
Borrowers with homes that have values that exceed the
maximum HUD lending limit (currently $726,525) receive less money as a percentage
of their property value than those who are below that value simply because
additional benefits cease to accumulate once the value rises above the $726,525 maximum.
Simply put, a borrower with all the same factors (age costs, etc.) owning a home valued at $726,525 will receive the same benefits as a borrower with a home valued at
$825,000. This would mean that the percentage of one’s home value is higher than the other, even though the dollars are the same and for homes up to $1,000,000, the
HUD program is usually still the best option in most cases. If your home is valued well above the HUD limits, you may benefit more from a jumbo or proprietary program.
Finally, borrowers are not “required” to have any amount of equity in their homes to obtain a reverse mortgage. Many times, borrowers have decided to bring additional
funds to close a reverse mortgage in to escrow when their existing liens exceeded the amount of the new reverse mortgage they would receive. They did not have enough
equity in the home for the reverse mortgage to pay off their existing liens but chose to use other funds to eliminate their current mortgage anyway and this is allowed.
Any borrower wishing to see if the reverse mortgage is right for them, should check a calculator such as ARLO™ so you can see what the loan will do for you based on your
circumstances. ARLO™ will determine your benefits based on the ages of the borrowers, the value of the home or the HUD lending limit, the interest rates available at
the time and then you can decide if the loan is right for you. If your home is valued above the HUD maximum limits, the HUD program may still or may not be the best
program for you and the calculator will show you how you fare under each program.