The amount of money you can borrow depends on the amount of mortgage security you have available. Generally, you can't use more than 80% of your home's equity based on its appraised value. However, most people will be paid much less. With 100% equity, you may be able to qualify for a lump-sum payment of nearly 50% of the home's value.
However, with 75% equity, that overall payment can be close to 25% of the value of your home. Unscrupulous home improvement sellers and contractors have focused on older people to help them get reverse mortgages and pay for home improvements, in other words, so they can earn money. When it comes to pricing, reverse mortgage lenders are now more willing than ever to help pay the costs of reverse mortgages whenever they can. The amount of money you can receive from a reverse mortgage generally ranges from 40 to 60% of the appraised value of your home.
Even when a reverse mortgage is issued by the most reputable lenders, it's still a complicated product. With a product as potentially lucrative as a reverse mortgage and a vulnerable population of borrowers who may have cognitive problems or desperately seek financial salvation, scams abound. The income you receive from a reverse mortgage will depend on the lender and your repayment plan. Rates and charges can vary widely between lenders; the federal government doesn't set reverse mortgage rates.
A reverse mortgage allows homeowners aged 62 or older to borrow with the equity of their home without having to make monthly mortgage payments. In a reverse mortgage, the loan amount is determined more by the homeowner's equity than by the total value of the home. Perhaps the most attractive feature of a reverse mortgage is that the loan doesn't have to be repaid until both the borrower and their non-borrowing spouse have died, sold the property, or moved out of the home. If you own a home, condo or townhome, or a prefab home built on or after June 15, 1976, then you may be eligible for a reverse mortgage.
If you know you're not in your permanent home, consider using your reverse mortgage to buy the right home instead of using it as a temporary solution—one that's not a real solution at all. Knowing what you want from your reverse mortgage will help you choose the best option to meet your long and short-term goals. But exactly how much equity do you need to have in your home to qualify for a reverse mortgage? How does a reverse mortgage compare to your other lending options? Here's what you need to know. A reverse mortgage can be a useful financial tool for senior homeowners who understand how lending works and what the pros and cons entail.
The rates and fees shown are not the actual rates that any particular lender could offer you, but they generally represent the rates that may be available on the market today. The maximum origination fee allowed under the HUD rules is reflected for illustrative purposes only, together with an estimated FHA mortgage insurance premium for a loan based on the value of the home provided, and the estimated registration and tax rates and other types of closing costs normally associated with a reverse mortgage loan.