Sunday, 22 March 2009

Reverse Mortgage - How Much 'More' Money Can I Get?

The new Administration in Washington recently passed legislation that changed the FHA Home Equity Conversion (HECM) Reverse Mortgage 'Lending Limit' to $625,500! Previously the FHA capped the Lending Limit at $417,000. The Lending Limit is the maximum home value used to calculate the benefit a senior can receive from a HECM Reverse Mortgage.

So now the question is 'How much more money can I get?' under the new guidelines. The easiest way to answer this question is to provide an example. A 70 year old homeowner could receive as much as $264,000 under the old guideline. Under the new guideline they could receive as much as $403,000. They would receive an additional $139,000 benefit. In both cases their home value must equal or exceed the Lending Limit to qualify for the maximum benefit.

Why is the new limit so important? What if the homeowner had an existing home mortgage of $300,000 and their objective was to eliminate their mortgage and the monthly mortgage payments? Under the old guidelines there would not be enough money from the Reverse Mortgage to pay off their mortgage. The homeowner would need to pay an additional $36,000 toward their loan payoff, an amount that would be difficult for most to shoulder. Under the new guidelines, they could pay off the mortgage and have over $100,000 to spare. That is truly a day and night difference to the borrower.

Another group of homeowners that will gain from the new limits are those seniors already benefiting from a Reverse Mortgage. Many of these homeowners only have about half of what they could receive under the new guidelines (depending upon their home value). These seniors can refinance their Reverse Mortgage and if their current Reverse Mortgage is a HECM the FHA will discount the Mortgage Insurance Premium on the new loan. The discount can be in the thousands of dollars.

Here is a review of how Reverse Mortgage benefits are calculated. When a senior applies for a Reverse Mortgage the lender will ask for the following information:

* The birthdates of the applicants
* The address of their primary residence
* The approximate value of their home
* The balance on any mortgage(s)

This information is entered into a proprietary Reverse Mortgage calculator from which a net dollar benefit is determined for the applicant. The calculator takes the applicant's information as follows:

1. Younger borrowers get less money than older borrowers.
2. Higher value homes provide more money than lower value homes up to but not surpassing home lending limits set by the FHA, currently $625,500.
3. The Reverse Mortgage money is net of the payoff of any current mortgage(s).

Would you like to know how much money you can get with a Reverse Mortgage? Try the Reverse Mortgage Calculator on my web site.

Steven Moline is a Reverse Mortgage Consultant with First Priority Financial serving all of California

I help senior homeowners who need extra cash for living achieve financial freedom for life. You need the facts to make an informed decision. I will come to your home in most cases and explain your benefits without pressure or obligation. For more information, to ask questions or to receive a complimentary brochure contact me toll free at 866-885-5573 or on the web at See my Web Log (Blog) for an open discussion with questions and answers at

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