FHA Reverse mortgage Formula

You might have seen the ads on TV about reverse mortgages, but what is a reverse mortgage? It is a loan for older homeowners that uses a portion of the home’s equity as collateral. Instead of the homeowner paying the lender, it is the lender that pays the homeowner based on the equity in the home.

How much can be borrowed?

The amount that can be borrowed in a reverse mortgage is determined by an Federal Housing Authority (FHA formula). The formula considers age, the current interest rate, and the appraised value of the home.

What are the requirements for a reverse mortgage?

You must be at least age 62

The home must be owned free and clear or all existing liens.

Any mortgage balance must be paid off with the proceeds of the reverse mortgage loan at the closing.

There are usually no income or credit score requirements.

How is the loan repaid?

The loan cannot become due as long as at least one homeowner lives in the home as their primary residence and maintains the home in accordance with FHA requirements (keeping taxes and insurance current).

The must be repaid when the last surviving homeowner permanently moves out of the property or passes away. The estate will have approximately 6 months to repay the balance of the reverse mortgage or sell the home to pay off the balance.


Higher rates = Higher Home prices?

2011-08-23 15:15:52 by irvinerealtor

The Federal Housing Administration (FHA) will reduce single-family loan limits in the highest-cost metropolitan areas from $729,750 to $625,500 starting Oct. 1. The reduction, announced Friday afternoon, will affect 669 of the 3,234 jurisdictions in which the FHA insures loans.
The current floor loan limit in areas where housing costs are relatively low will remain unchanged, at $271,050 for one-unit properties. The mortgage loan limit and maximum claim amount for FHA-insured reverse mortgages will also remain unchanged, at $625,500.
The current maximum loan limits were to be retired in January 2009, but legislation delayed implementation of the loan-limit...

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A New Day for Reverse Mortgages?  — National Mortgage Professional Magazine
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  • Avatar bag-ten In 2003 what did FHA Reverse Mortgages pay in interest on unused available cash?
    Jul 31, 2006 by bag-ten | Posted in Personal Finance

    In 03 the economy came back like gangbusters. Did money that seniors had in reverse mortgage equity reserves also benefit from rapidly rising rates? Did those rates go up and by how much? Or did they even go down?

    • Bag-Ten, The reverse mortgage equity reserves or lines of credits grow at the same rate as the interest being charged against the borrower including the FHA mortgage insurance payment of .5% a year. So to figure out what someones line of credit growth rate was at any time you have to know what the current interest rate is being charged. FHA reverse mortgage interest rates are tied to the 1 year Treasury Bill plus 1.5%. In 03 the average T-Bill was around 1.25%. So to figure out what the return was in 03 for a reverse mortgage line of credit you would figure 1.25%(T-Bill) + 1.5%(Interest rate) …