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Hello, I just want to know if there is a maximum loan to value on a reverse mortgage. Does the property need to be fully paid in order to qualify? Are the requirements also the same as a regular loan (full docs)?

By Cherry on 01.17.2019

I want to clarify how reverse mortgages work, as they differ from traditional loans in a few key ways.

Firstly, reverse mortgages don't operate on a Loan-to-Value (LTV) basis in the traditional sense. Instead, the amount you're eligible to receive is determined by several factors, including the value of your property or the national lending limit (whichever is lower), your age, and current interest rates.  This information is input into a reverse mortgage calculator using a specific formula to calculate your potential benefits.

It's important to note that your property can either be fully owned or have an existing loan. However, if there are any outstanding mortgages or liens, they must be fully repaid using the proceeds from the reverse mortgage.

If the reverse mortgage amount isn't enough to cover these debts, you'll need to supplement the shortfall with other funds to proceed with the loan.  While the eligibility criteria for a reverse mortgage differ from traditional loans, applicants must demonstrate financial responsibility.

This includes having a satisfactory credit history and sufficient income to cover property-related and debt obligations post-loan.  The loan approval process involves a residual income evaluation to ensure that, based on your family size, you have enough income remaining after paying off debts and property charges.

To get an estimate of your eligible loan amount, I invite you to visit our website and use our non-intrusive calculator.  By answering a few simple questions—rest assured, no personal information is required—you'll quickly learn how much you could receive and the options for receiving it, such as a lump sum, a line of credit, or monthly payments.

We are here to assist you if you find the preliminary figures agreeable and wish to explore further, including assessments related to your income and credit.

Also See: Reverse Mortgage Principal Limit Explained

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