Perhaps you've heard by now, perhaps not, but lenders, as of November 6, 2008 could begin closing reverse mortgages with the new higher lending limits in place.
The new limits in most parts of the country are $417,000. This is an increase by as much as two times in many of these same areas. So, what does this mean?
Of the multiple factors entering the equation determining the value of the home, or the FHA insuraable loan limit, is of vital concern as the reverse mortgage lender uses this dollar figure and related equity as security for the mortgage.
Don't forget, the lender is using the house and it's equity as security for the mortgage. The value of the home, or the FHA insurable limit, is the first and most important determination as to how much a borrower can receive.
Interest rates and age of the youngest senior who's name will be attached to mortgage are the other determing factors.
It probably comes as no surprise but reverse mortgage companies use actuarial tables. Yes, it may seem cruel but knowing how long the borrower is going live helps them determine the dollar figure to lend. Age is the next most important factor.
Forward lenders today have the serious problem of more being owed than the home is actually worth. Reverse mortgage companies fear the exact same problem on the tail end of these mortgages. Therefore the borrower, who will likely pass on earlier rather than later, will be loaned more money.
Interest rates are thought of in a similar manner. The greater the interest rate, the quicker the accrual of interest will eat away at the security for the mortgage. Therefore, lenders lend more to prospective borrowers as rates go down than the vice versa.
People often say to me, "What percentage of my value am I going to get?" There is no percentage. All three variables need to be input into the formula and out will come the number.
For a rough guestimate, borrowers aged 90, would receive roughly seventy-five percent of the home's value or loan limits (the lesser of the two). The young sixty two year old would qualify at about fifty percent.
The new limits in most parts of the country are $417,000. This is an increase by as much as two times in many of these same areas. So, what does this mean?
Of the multiple factors entering the equation determining the value of the home, or the FHA insuraable loan limit, is of vital concern as the reverse mortgage lender uses this dollar figure and related equity as security for the mortgage.
Don't forget, the lender is using the house and it's equity as security for the mortgage. The value of the home, or the FHA insurable limit, is the first and most important determination as to how much a borrower can receive.
Interest rates and age of the youngest senior who's name will be attached to mortgage are the other determing factors.
It probably comes as no surprise but reverse mortgage companies use actuarial tables. Yes, it may seem cruel but knowing how long the borrower is going live helps them determine the dollar figure to lend. Age is the next most important factor.
Forward lenders today have the serious problem of more being owed than the home is actually worth. Reverse mortgage companies fear the exact same problem on the tail end of these mortgages. Therefore the borrower, who will likely pass on earlier rather than later, will be loaned more money.
Interest rates are thought of in a similar manner. The greater the interest rate, the quicker the accrual of interest will eat away at the security for the mortgage. Therefore, lenders lend more to prospective borrowers as rates go down than the vice versa.
People often say to me, "What percentage of my value am I going to get?" There is no percentage. All three variables need to be input into the formula and out will come the number.
For a rough guestimate, borrowers aged 90, would receive roughly seventy-five percent of the home's value or loan limits (the lesser of the two). The young sixty two year old would qualify at about fifty percent.
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