How Much Money Can You Borrow

How Much Money Can You Borrow

 


How Much Money Can You Borrow

A borrower who uses an FHA-insured Home Equity Conversion Mortgages (HECM) will receive a reverse mortgage amount based on a formula which includes a Maximum Claim Amount. In general, this means the maximum amount you can receive will be determined by factors including the age of the borrower(s), and the appraised value of the property (or the maximum FHA mortgage amount for your area, if lower).

There are also no restrictions on the value of the homes qualifying for a HUD reverse mortgage. However, the amount that may be borrowed is capped by the maximum FHA Lending Limit established by Simulus Package in 2009 of $625,500. The higher lending limit is expected to roll back to $417,000 on September 30, 2011.

How Much Money Can You Borrow You should discuss the formula with your lender and your FHA-approved housing counselor. The maximum amount that you can receive depends on your age, the interest rate at the time you close, and the appraised value of your home. For example, based on a loan at recent interest rates, a 65-year-old could borrow up to 60 percent of the home’s value, a 75-year-old could borrow up to 70 percent of the home’s value, and an 85-year-old could borrow almost to 80 percent of the home’s appraised value — up to the FHA loan limit.

The maximum loan amount depends on your age, the interest rate at the time you close and the equity in your home.

  • Line of Credit: You make withdrawals whenever you choose, in whatever amount you’ve chosen, up to your maximum principal limit.
  • Lump Sum: Take all or any part of the loan at the time you close.
  • Tenure Plan: You receive fixed monthly payments as long as you own and occupy the home as your principal residence.
  • Combination: Within certain limits, you may combine the lump sum or tenure options with the line of credit.

Are there any restrictions on how I can use the loan?
No. Use it to pay medical bills or property taxes, repair your home or improve your quality of life.

When do I repay the loan?
Reverse mortgages are designed to eliminate the burden of making monthly mortgage payments. The loan will not be due until you no longer own and occupy your home as your principal residence. At that time, the money you have borrowed plus the interest and fees will be due and payable. Generally, borrowers or their estate repay the loan by selling the home. If the home is sold, you or your estate may keep the proceeds in excess of the amount due the lender