8184 / How much money can a person expect to receive from a reverse mortgage?
(1) The age of the borrower, or the youngest age of joint borrowers.(2) The prevailing interest rates in the marketplace in which the loan is being written.
(3) The lesser of the appraised value or the maximum loan limit (set by HECM/FHA at $765,000 for 2020 and increasing to $822,325 in 2021, $937,500 in 2022, $1,089,300 in 2023 and $1,149,825 in 20241 (note that these limits were not increased for a number of years, but have increased steadily over the last few years)) or the sales price of the home being purchased.
(4) The initial Mortgage Insurance Premium.
Unlike traditional mortgages where the loan to value (LTV) ratio is a significant feature, in a reverse mortgage there is no stated maximum. Unfortunately there is a general misunderstanding that the LTV ratio for a reverse mortgage is linked to the age of the borrower, leading many borrowers to believe that a 67-year-old would have an LTV ratio of 67 percent, a 70-year-old 70 percent, etc. In reality, the range for most LTV ratios is 50 to 65 percent of the home’s appraised value.
Planning Point: The private sector is another option available on reverse mortgages issued through the HECM/FHA for homeowners with appraised home values in excess of the maximum annual value.
Those who choose this route should keep in mind that private lenders are not required to follow the strict letter of the law as set by HUD and administered by the FHA. They should, however, insist that the general outlines of the HECM be followed as closely as possible.