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From America's #1 Rated Reverse Mortgage Lender

How is the reverse mortgage life expectancy set-aside calculated?

By Fernando A. on 12.14.2018

Dear Fernando,

HUD determines the required funds for a Life Expectancy Set Aside (LESA) based on a borrower's life expectancy, income qualifications, and past payment history for taxes, insurance, and other property-related expenses.

How HUD Calculates LESA

The LESA amount is designed to cover these costs over the borrower's expected lifetime while accounting for potential growth in the line of credit. The required amount depends on:

The borrower's age
The annual cost of property taxes and insurance
The loan’s interest rate and projected credit line growth

For example:

A 78-year-old borrower with $500 in annual taxes and insurance may require an estimated $9,606 in LESA funds.
A 62-year-old borrower with $4,000 in annual property taxes and $1,200 in insurance could need around $83,661 in LESA due to higher expenses and a longer payment period.

These figures are estimates and may vary based on interest rates and other factors.

Benefits of LESA

No interest accrues until funds are used – Similar to a credit card, LESA funds are available when needed but don’t cost you anything until they are used for tax or insurance payments.
Automatic payments – Eliminates the stress of keeping up with tax and insurance bills, ensuring they are paid on time.
Unused funds are not part of repayment – If you move or pass away before using the LESA funds, neither you nor your heirs owe anything for the unused portion.

The LESA provides peace of mind by ensuring your property expenses are always covered, protecting both your home and your financial well-being.

For more details, you may also find this helpful: How the Reverse Mortgage LESA Offers Peace of Mind.

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