One of the first questions borrowers may ask when inquiring about a reverse mortgage is “how much money can I get?” Generally speaking, the amount you may be eligible to receive depends on the following:
- Current interest rates
- Appraised value of your home
- Any existing loans against the property
- Age of the youngest person on the title (or eligible non-borrowing spouse)1
- The product you choose
Product
There are different types of reverse mortgages, with the most common being a Home Equity Conversion Mortgage (HECM). A HECM is a loan insured2 by the Federal Housing Administration (FHA) with a maximum claim amount of $726,625. This means that even if your home is appraised for more than $726,625, that lending limit will be used instead of the appraised value. Furthermore, HECMs limit the amount of proceeds available to the homeowner during the first 12 months. This restriction is often referred to as the “Initial Disbursement Limit”, which is calculated as 60% of the principal limit, or mandatory obligations plus an additional 10% of the principal limit.3
A jumbo reverse mortgage is not FHA-insured nor does it have a lending limit of $726,725. Some lenders allow borrowers to access up to $4,000,000 with a jumbo reverse mortgage. Borrowers can receive the full amount of proceeds upfront, immediately after the loan closes, as there is no limit to the amount of proceeds available in the 1st year for jumbos.
Fixed vs. Adjustable (LIBOR)
The rate type you choose can also affect the amount of money you will receive with a reverse mortgage. With a fixed rate loan, you receive the loan proceeds in one lump sum. With an adjustable rate loan, you can choose between tenure (equal monthly payments that continue throughout the life of the loan), term (equal monthly payments for a specified amount of time), a line of credit, or a combination of the above.
Reverse Mortgage Example: How Much Money Will I Get?
- 65 Years Old
- $200,000 Mortgage
- Home Appraised for $850,000
Below is an illustration of the available proceeds this homeowner would receive with the following products from a lender:
HECM Fixed (4.56%), HECM LIBOR (3.875%), and a Jumbo (Fixed (6.50%)):*
| HECM 4.56 Fixed | HECM 3.875 LIBOR | Jumbo 6.50 Fixed | |
|---|---|---|---|
| Principal Limit | $ 333,475 | $ 278,986 | $ 365,500 |
| Cash Available At Closing | $ 33,348 | $ 27,299 | $ 162,797 |
This same borrower would be able to access anywhere between about $30,000 to more than $162,000 with a reverse mortgage loan. Keep in mind that regardless of the product you choose, no lender will allow you to borrow 100% of your home’s equity. The amount of loan proceeds you will receive from a reverse mortgage will only be a portion of your equity.
If you are interested in learning more about how much money you may be eligible to receive with a reverse mortgage, call (800) 976-6211 to speak with a licensed reverse mortgage specialist. You can receive a same-day, free loan estimate with no obligation.
Important Disclosures
1 For a Home Equity Conversion Mortgage (HECM) a spouse must meet the following requirements to be considered eligible: 1) be the spouse of the reverse mortgage borrower at the time of loan closing and remain the spouse of the borrower for the duration of the borrower’s lifetime. 2) Be properly disclosed to the lender at origination and specifically named as a Non-Borrowing Spouse in the loan documents. 3) Occupy, and continue to occupy, the property securing the reverse mortgage as the principal residence.
2 As required by the Federal Housing Administation (FHA), you will be charged an initial mortgage insurance premium (MIP) at closing and, over the life of the loan, you will be charged an annual MIP based on the loan balance.
3 https://www.hud.gov/sites/documents/14-21ML.PDF
* These examples are using the following:
HECM 4.56 Fixed: A 65-year-old borrower with a property in California and an adjustable-rate HECM loan (initial interest rate of 6.033%). It’s using an appraised value of $850,000, a loan origination fee of $6,000, a mortgage insurance premium of $14,530.50, and other settlement costs of $2,703, with the total closing costs of $23,233.50. The available proceeds presented is the maximum available cash during the 1st year ($33,347.50), which is calculated using the initial disbursement limit ($256,581.00) minus mandatory obligations ($200,000+$23,233.50= $223,233.50). Interest rates may vary and the stated rate may change or not be available at the time of loan commitment.
HECM 3.875 LIBOR: A 65-year-old borrower with a property in California and a fixed-rate HECM loan (interest rate of 4.56%). It’s using an appraised value of $850,000, a loan origination fee of $6,000, a mortgage insurance premium of $14,530.50, other settlement costs of $2,703, a lender credit of $17,108.50, with the total closing costs of $6,125. The available proceeds presented is the maximum available cash during the 1st year ($27,898.56), which is calculated using the initial disbursement limit ($234,023.56) minus mandatory obligations ($200,000+$6,125= $206,125). Interest rates may vary and the stated rate may change or not be available at the time of loan commitment.
Jumbo 6.50 Fixed: A 65-year-old borrower with a property in California and a fixed-rate EquityIQ loan (interest rate of 6.50%). It’s using an appraised value of $850,000, a loan origination fee $0 (no lender credit), a mortgage insurance premium of $0, and other settlement costs of $2,703, with the total closing costs of $2,703. The available proceeds presented is the cash available to the borrower at closing which is calculated as the principal limit minus mandatory obligations ($516,000-$2,703 = $513,297). There is no additional disbursement limit with the EquityIQ product. Interest rates may vary and the stated rate may change or not be available at the time of loan commitment.