How much can I get from a reverse mortgage?

A reverse mortgage is a means by which you can access a percentage of the equity in your home. How big of a percentage depends on two factors:

·       Your age (62 minimum)
·       The current interest rates

Lenders use FHA actuarial tables based on you living to 100 and the expected loan rate to determine exactly what percentage they will loan. If the expected rate for the loan (how the lender expects it to average over the next 10 years) is 5.50% (the rate floor) or lower, I have a rule of thumb you can use. Please note that this is not a promise by any means – it just gets you in the general ballpark.

Loan Percentage = Age (as a percentage) – 5%

If the expected rate of the loan is over 5.50%, the loan percentage starts dropping quickly. A 1% increase to 6.50% can decrease the loan percentage 9% or more.

So at 5.50% loan rate, an 85-year-old might net 80% of their home value while a 62-year-old might net 57%. If the loan rate increases to 6.50%, those loan percentages drop to about 71% and 48% respectively.

Lower-value homes net less because the fixed closing costs are a bigger factor to the overall transaction cost. Manufactured home costs can be slightly higher because they often need stem wall upgrades to meet FHA standards.

Dave Parker
602-750-8166
Your Reverse Mortgage Resource
www.ParkerInReverse.com

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Home Care Central Phoenix and Home Care Greater Phoenix provides elder care and senior care in Phoenix. Call us today at 623-583-5868, 602-265-8228 or 480-991-3959.