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Reverse Mortgage Eligibility

Accurate, Up to Date, Reverse Mortgage Information & Answers from our Experts.
 

Answered By Our Experts

Question From Rod G.
7/17/2018
Whats the advantage or disadvantage of getting your money in one payment?
Expert Answer

Hi Rod,

I think it all depends on your goals and needs.  If you need the money to pay off an existing mortgage or for other purposes, then you may need to take the funds at one time at the start.  However, if you don’t have a need for the funds right away, there is no sense in taking all the money and accruing interest at a higher rate than you would be able to make on the money if you put the loan proceeds in the bank for example.

Borrowers who borrow all the money only to put the funds into a bank account making less than one percent interest while accruing much more interest on the borrowed funds quickly find that is a losing proposition.  If you leave the funds in the reverse mortgage, you do not accrue interest on the money you have not yet borrowed and your line of credit grows on the unpaid balance.  This is not interest available to you, but is more money available to you later when you might have a bigger need and you can pull funds to use as you need them.

Some borrowers really need the money from the beginning for other purposes.  Some use the funds for medical expenses, other debts that are much higher rates that they want to pay off.  Some want to just lower their monthly payments to give themselves the breathing room or so that they can finally travel if that is their desire.  Some borrowers have expressed the desire to give gifts to family members (children and grandchildren) and wanted to see them use it while they can still enjoy seeing the family using the fruits of their labor so they didn’t have to wait until they had passed.  Some also use the money to fund family educations.

These are just some of the reasons borrowers choose to use reverse mortgage proceeds even though they don’t always have to use the funds right away, but they want to.  Still other borrowers use the reverse mortgage to purchase a home that better suits their needs or to be closer to family members and the purchase reverse is used in one payment initially.  It all depends on your goals and what you are attempting to achieve with the loan.

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Question From Jeanne B.
7/17/2018
OK. A Reverse Mortgage lender told my husband we have to many liens on our home and that the home is to expensive to qualify?
Expert Answer

Hi Jeanne,

Firstly, there is no limit to the amount of the liens you can have on your home.  There is however a limit to the amount that any reverse mortgage will give you based on the value of the home, the interest rates in effect at the time and the ages of the borrowers.  They may have been trying to tell you that the amount for which you will qualify would not be sufficient to pay off the existing liens or loans on the home.

In this instance, you still have the option of bringing in your own cash to close the loan if you are able to do so if that is your wish in order to eliminate your loan payments.  For example, if you owed $400,000 and your maximum benefit amount is $375,000, you can bring the other $25,000 in from savings to close the loan.  The only requirement is that the proceeds may not be borrowed funds.  You must be able to show that you had the funds to bring in or that they are a bona fide gift from a close family member and they can source that they had the funds to give you (as well as the transfer of the funds).  This would not be a fee, it would be you paying down your loan an the new loan would start with a lower balance.

As far as the home being too expensive, I can only assume you mean that the house is valued over $679,650.  This is the HUD maximum lending limit and properties exceeding this value receive no higher loan amount than properties at this value.  In other words, a property for any borrower with the same interest rate would qualify for the same Principal Limit (loan amount) under the HUD program as a property for that same borrower valued at $1,000,000.  Any added value above the HUD maximum of $679,650 brings no more loan amount to the borrower.  But, that may not be the last word on the subject because there are jumbo programs available that have loan amounts that exceed the HUD limits.

These programs typically have lower lending percentages than the HUD program (especially for borrowers under the age of 70) so the property value has to be more than just a little above the HUD maximum before they make sense for most borrowers, but if your home is worth over $1,000,000, you should certainly see if the program would be a benefit to you.  You can check our free, no hassle, real-time calculator to see if this would benefit you..  I look forward to seeing if I can be of any assistance.

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Question From Nina
7/11/2018
We live in Santa Barbara, CA, and have lived in this home for more than 30 years. It is appraised in the current market to be worth $1,100,000-$1,200,000. We owe about $260,000. There's a home for sale in another town we like for $995,000. If we sold our home, can we pay $600,000 towards purchase of new home and get a reverse mortgage for the remaining $395,000?
Expert Answer

Hi Nina,

I can’t tell you from the information provided what your reverse mortgage benefits would be but you can certainly go onto our website, put your information into the calculator and it will tell you exactly what you can and can’t expect from a reverse mortgage for your circumstances and in your chosen market!  It’s easy, there is no hassle and no obligation.  We don’t need any really personal information and depending on the closing costs, your ages and interest rates when you are ready to move on the sale and purchase, you may really like the results.

If you prefer to speak to one of our specialists please give us a call at (800) 565-1722

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Question From John B.
2/12/2018
I purchased a house in 12/17. I was 65 years old at the time and my domestic partner was 64. There is approx. $30k in equity Are we eligible for a reverse mortgage?
Expert Answer

Hi John,

HUD determines the amount of the loan based on the borrowers ages and based on interest rates.  At 64 for the youngest borrower, the Principal Limit which is the amount of the loan before any costs to obtain the loan or pay off any existing liens, will be about 46% at today’s rates.  You need to determine the value of your home and multiply by 46% and then subtract $30,000 from the amount of any liens and see if this works for you.  Based on these formulas, today’s rates and typical costs, with $30,000 equity as the benchmark, it looks like the highest value that you could own and still do a reverse mortgage loan would be a $45,000 home with a $15,000 existing lien.  Any higher value would also have higher existing loan amounts to keep the equity position at $30,000 and that would put you short to close the reverse mortgage.

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Question From Alan O.
11/30/2017
My house has been appreciating over 6%/year in Ca. I'm wondering if I used a monthly stream from my equity that was less over a year than the market value appreciation, what my equity would be at the end of a year? If I used 6.4% of my equity in the first year of having a reverse mortgage and market appreciation was 6%, would my equity be reduced by .4% over that first year? Or put another way, what would my equity be at the end of the first year? Also what fees are involved in acquiring a reverse mortgage and how much do those fees cost?
Expert Answer

Hi Alan,

The best way for you to answer questions like this is to get a proposal with breakdown of all costs and an amortization schedule.  We have a calculator on line known as ARLO (All Reverse Loan Optimizer) that will also allow you to run different scenarios at: https://reverse.mortgage/calculator.

ARLO does not make you supply your personal information to run different calculations and “he” will give you real-time numbers with the actual costs for your area.  Check him out.

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Question From Mary Ellen R.
9/01/2017
I am 67. How much equity must I have in home to qualify for reverse mortgage?
Expert Answer

Hi Mary Ellen,

There is so much more involved now that I really can't just give you a pat answer anymore.  If your home is valued over the HUD maximum lending limit, it will change the percentage.  Different parts of the country vary by quite a bit as well on some of the closing costs.  If you have had any credit problems it could require a set aside to pay taxes and insurance and that amount would depend on the ages of the borrowers and the amounts of the taxes and insurance.  The best I can offer you is a free, no obligation quote that you can receive from our website at reverse.mortgage or feel free to give us a call at 800-565-1722 and we can go over the numbers with you as they relate to your circumstances.  No pressure and we don't need any real personal information to do it (just a month and year of birth for the youngest borrower in addition to the location of the property - don't even need the actual birth date).  We would be happy to give you a proposal that shows you what you might expect that would be so much more beneficial than an arbitrary number that can change with so many factors.

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Question From Richard D.
2/19/2017
Several Questions: (1) Is mortgage interest on a Reverse Mtg. ("RM")accrued on the entire approved credit limit or only on the actual amount advanced (paid out)? Example. If the approved credit limit is $300,000 but only $100,000 has been paid out (advanced), mortgage interest is accrued on what dollar amount? Is it on the $100,000 advanced or the entire $300,000 credit line? (2) Can borrower make periodic partial principal payments, against the outstanding principal balance, and thereby reduce the actual amount of mortgage interest accrual? (3) How and when is a refinance of an existing RM allowed with a brand new RM? And at what expense to borrower on any refinancing? And what are the restrictions, if any? (4) When using the RM approved credit limit for the purchase of a new home (purchase money), is the entire(100.0%) approved credit line available for this purpose? Or, is there some restriction on the amount that can be advanced in the first 12-month period? If there is a restricted sum, what is the limit and secondly why the limit? A final note. I am anticipating purchasing a newly constructed home, from a production builder, at a price of about $550,000. I am wanting to know what dollar sum I can expect from a RM so that I can determine how much of my own funds I will need to bring to the closing table. I am 75 years old and my wife will be 69. I look forward to your answers. RD
Expert Answer

Hi Richard,

Since you numbered your questions, I will answer them in the same manner to keep it straight.

1) Interest only accrues on the portion of the line that you use.  If you only borrow a portion of your line then you only pay interest on the outstanding balance, not the total amount available to you if that is higher (such as in your example). Learn more about the line of credit and interest charges here

2) There is never a payment due but also never a prepayment penalty on a reverse mortgage so you can make a payment of any amount at any time, up to and including payment in full, without penalty.  Since there is no payment due and no due date, anything you choose to pay may be paid at any time you choose.  Any funds you repay may be re-borrowed at some point in the future if you desire but if at any time your balance reaches 0, unlike a home equity line of credit, your loan would be paid in full and closed.

3) Yes you can "technically" refinance your reverse mortgage loan any time after 18 months.  I say technically because you have to meet a 5 times benefit to do so.  In other words, you must be able to attain at least 5 times more benefit from the new Principal Limit than from the old Principal Limit (not the current balance) as it costs for the new loan.  The costs are typically the third party costs in your area which include any state and local fees (this can be as low as $2500 for a property valued at $550,000 to as high as $5500 in some states).  HUD will credit any Initial Mortgage Insurance Premium you paid on the first transaction so the additional cost would only be incurred if the property increased in value - but then again, a pretty substantial increase in value is usually the only way the 5 times benefit will happen.  That's why I say that technically you can refinance the loan, but many borrowers find that the required increase in value does not allow them to do so in many cases except for during times of rapid appreciation.  I advise borrowers not to plan on a refinance and then if it is possible later, it is a unexpected bonus.

4) HUD allows borrowers 100% usage of the line under 2 scenarios - when the funds are going to pay off current liens/mortgages on the home and for a purchase transaction.  You would not have to wait for access to any funds and could receive 100% of your benefit amount to purchase a home on either the line of credit or the fixed rate reverse mortgage.

5) I would encourage you to contact our office for a proposal on the purchase.  We do not require you to provide a lot of personal information and we do not hound you to complete the transaction - we are not a high pressure company.  The reason being that on a purchase loan, some states have even higher purchase costs (such as mortgage taxes, intangible taxes, etc) and I do not know which state you are writing from.  I would also like to send you a brochure we authored that gives potential purchase borrowers some additional information and you said you were considering a new construction home.  There is an additional HUD requirement at this time that on new construction, we cannot even take a loan application until after the Certificate of Occupancy has been issued by the county or city where the property is located.  Many builders will not accept this limitation as they want to close the loan right after the C of O is issued, not start the loan at that time.  We are hoping that HUD may change this and other purchase requirements, but as of today, that is the rule under which we have to operate and there are other restrictions that all purchase borrowers should know as well. You are also welcome to use our reverse mortgage for purchase calculator to gather estimates anytime. 

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Question From Lynda H.
9/23/2016
How much equity do you need to keep in your house mortgage to qualify for the reverse mortgage?
Expert Answer

Hi Linda,

The benefit amount that borrowers receive is determined by a number of things.  Borrowers' ages, interest rates, HUD Lending Limits and new qualification guidelines that require some borrowers to set money aside to pay taxes and insurance make this question one that is impossible to give a generic answer.  The best thing for anyone to do is to go to our website and request a quote that is specific to your circumstances.  There is no obligation and no cost to obtain a quote but be sure to let us know if you have had any credit problems in the past with special attention to your current mortgage/rent and taxes and insurance on your home.

Feel free to use our online calculator which will estimate how much you're eligible for: https://reverse.mortgage/calculator or call us (800) 565-1722

Do you have a question? click here for an answer
Question From John K
4/13/2016
How much equity must I have on my house in order to obtain a reverse mortgage? say I have a 300,000 house with half the principle paid.
Expert Answer

Hi John,

There are several factors that determine how much money you can receive from a reverse mortgage. Your age, property value, and interest rates will determine how much you will receive as a percentage of the property. HUD has also changed the program in recent years to limit the amount borrowers can take in the first 12 months if they are not paying off an existing mortgage.

The minimum age a borrower must be to obtain a reverse mortgage is 62 years of age. The amount that a borrower receives in benefit at 62 years of age is approximately 52% when interest rates are at or below 5% (which they are now). Then depending on where you are in the country any cost to get the loan would be deducted from that benefit amount. Some areas of the country the costs are higher because the state these such as intangible tax, other mortgage taxes and the title fees run higher than other parts of the country. It also pays to compare lender costs from one lender to another.

So when you say half the principal is half paid, if you are telling me that you owe $150,000 on a home valued at $300,000, the chances are very good that you will be able to get a reverse mortgage without having to come out of pocket to pay fees if you live in an area of the country where the fees are not too high and if you are older than 62 years of age. If you just turned 62, and you live in one of the areas where the costs are the highest, you can still get the loan but it may be tougher to do so without having to put a little bit of cash into the transaction to close.

Your best bet is to go onto a website such as ours and obtain a free quote. There is no obligation, we do not require you to give us a lot of personal information, and we will not hit you with a lot of high pressure sales just to find out.

If yo9u would like a quick estimate feel free to use our online calculator or call us Toll Free (800) 565-1722

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Question From Rhonda
8/11/2014
I am 48 years old. Is there a way to pre assess my future eligibility, for the purpose of determining my retirement needs/options?
Expert Answer

Hi Rhonda,   The factors that go into the reverse mortgage calculations are the value of the property, the amount owed, your age, interest rates at the time, current HUD Lending Limits and the HUD program parameters.  You could look at what a 62 year old borrower receives today and it may not look anything like that in 14 years.  I'm sorry, I don't know of any way to tell you what the rates will be, home valut HUD will have done with their program by that time.

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Question From David
2/23/2012
Based on the VA taxed assessment value of my home, and my existing amount owed on the mortgage, how much could be borrowed if I applied for a Reverse Mortgage?
Expert Answer

Well, based on those two criteria, nothing. The reason being, those are not the factors used to determine your benefit amount on a reverse mortgage. The program uses reverse mortgage calculator which takes the following factors into consideration to determine how much money you will receive:

• Property Value (as determined by an FHA appraisal, not a tax assessment) or the HUD lending limit, whichever is less

• The age of the youngest borrower on the loan

• Applicable interest rates

• The program chosen by the borrower (HUD has both Standard and Saver programs that give borrowers different benefit amounts in return for different insurance costs)

• Any fees being charged up-front or ongoing (such as mortgage insurance premiums, loan origination fees, closing costs and servicing fees, if any, etc)

• And your existing mortgage would have to be paid from the proceeds or funds you brought in from a verified source

The amount you would receive would be the amount of your benefits minus the costs to obtain the loan plus the amount to pay off existing mortgages and liens. In some instances, people do not receive enough benefit in their reverse mortgage to pay off their entire existing mortgage but choose to bring money in at closing in order to eliminate their monthly mortgage payment. The bottom line though, to determine how much you could receive is quick and simple and requires only a minimum amount of information at the link above.

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