One of the first things you should look into when receiving a reverse mortgage is how much money you will be able to receive. Knowing how much money you qualify for will help you to decide whether or not a reverse mortgage is right for you. There are many things that affect how much money you will be able to receive with a reverse mortgage: your age, your home's value, your interest rate, your closing costs and which type of reverse mortgage you choose.
Your Age: When you get a reverse mortgage, your age will be a factor in how much money you will be able to receive. That is because the longer you live, the more money your lender will have to pay you if you choose to receive monthly cash advances and the more money that will be added to your loan balance to pay for servicing fees, mortgage insurance premiums and interest ("Money From Home: A Guide to Understanding Reverse Mortgages"). Typically, the older you are the more money you get, because you are not expected to live as long ("Basic Loan Features"). If you are married, your lender will either use the age of the youngest spouse or average the ages of both spouses (Lerner 233).
Your Home's Value:Your home's value you will also factor into how much money you can receive from a reverse mortgage. Your home's value matter's because when you get a reverse mortgage, your home is used as the collateral. Your lender expects to be paid after you sell your home. Therefore, they will never want to lend you more than your home is worth. The more your home is worth, the more money you will be able to get with a reverse mortgage ("Basic Loan Features").
Your Reverse Mortgage Interest Rates: The interest rate on your reverse mortgage will vary depending on the type of reverse mortgage you receive and the lender you choose. When comparing interest rates, remember that the higher the interest rate, the more expensive it is to borrow money. Therefore, the higher the interest rate, the less money you will receive ("Frequently Asked Questions").
The Type of Reverse Mortgage: There are many different payment plans you can choose when getting a reverse mortgage. You can get the money in a large lump sum, through monthly cash advances, through a credit line or a combination of those three payment plans ("A New Kind of Loan in Reverse"). The total amount of money you can receive from your reverse mortgage will greatly depend on which payment plan you choose. For example, if you have no spouse and are a 70 year old born in December who owns a $200,000 dollar house in Key Largo, Florida, from a HECM reverse mortgage you would receive ("Reverse Mortgage Calculator Estimates"):
In a Lump Sum: $103,796
A Flat Creditline: $103,796
A Growing Creditline: $103,796 that grows 7.34% a year
A monthly cash advance: $680
Remember, that those numbers above are just estimates of what you could receive. However, they demonstrate how much the type of reverse mortgage you choose affects how much money you can receive.
To get a really good idea of how much money you can receive from a reverse mortgage, use an online loan reverse mortgage calculator. The calculator will probably ask you for your age, your spouse's age, how much your home is worth and where you live.
The rest of our Reverse Mortgage Guide:
