Factors involved in the formula calculation of HECM reverse mortgage loans
While there is no set formula that can equally assess each individual under the Home Equity Conversion Mortgage (HECM) program for reverse mortgage, the factors used in the calculation of the eligibility amount remain as constants. While the use of an online reverse mortgage calculator can give an estimate of the grantable amount, only reverse mortgage counselor can provide the exact dollar amount provided all eligibility requirements are met.
The final actual loan amount that an individual would be eligible for is based on the type of HECM loan picked, the availability of funds for the loan picked, the net value of the property, the current market rate of interest, the amount of loan outstanding on the property, and the applicant’s age. The current limit for the maximum grantable limit on HECM reverse mortgages is $636,150, which has gone up from the previous year’s $625,500.
The process of reverse mortgage calculation is simple yet complex at the same time. The set amounts, current market rates and well as updated interest rates are required for an appropriate estimation. An individual who is say 65 years old and has a home that is worth $300,000 with a pending $50,000 loan on the home, then the amount that the individual would be entitled to receive would be $150,000. However, this does not translate into a payment of the full $150,000 because the pending loan amount has to be paid of form the granted amount. This will in turn eliminate the pending monthly payment of mortgages. Consequently, the borrower would be free of any extra payment of loans and better financing options.
Inherent in these calculations would be the intertwining of the current home value with the available loan amount, the total net settlement of costs, the available loan proceeds minus the current mortgage amount resulting in the net amount available to the applicant.
The older the age the higher the amount would increase. While a 62 year old would get only around $110,000 on their property, a 76 year old would be entitled to receive $149,000 for the same property. Another factor that plays a major role in the calculations is the maximum limit available for the county authorized by the Federal Housing Administration (FHA). Keeping oneself updated about the current market rates would be an advantage to pick the reverse mortgage loan at the right moment. Since a portion of the final amount would be a payoff towards the pending loan, the lower the final pending amount, the higher the available loan amount would be minus these expenses.