1. Age of the Youngest Borrower
The age of the youngest borrower on the title is a significant factor in calculating the maximum loan amount. The older you are, the more you can borrow. This is because reverse mortgage programs are designed to provide higher loan amounts to older borrowers, as their life expectancy is shorter, reducing the lender's risk.
2. Current Interest Rates
The prevailing interest rates in the market have a direct impact on the maximum loan amount you can receive. In general, higher interest rates will result in a lower maximum loan amount, while lower interest rates will lead to a higher loan amount. Keep in mind that reverse mortgage interest rates can change over time, so it's essential to consider this factor when planning your loan.
3. Appraised Home Value
The value of your home, as determined by an appraisal, plays a crucial role in calculating the maximum loan amount. The higher your home's appraised value, the more you can potentially borrow. It's important to note that the Federal Housing Administration (FHA) insures most reverse mortgages, and the FHA has specific guidelines regarding maximum home values.
4. Federal Loan Limits
The FHA sets maximum limits on the loan amounts for reverse mortgages, and these limits can vary by location. The maximum loan amount cannot exceed the FHA's limit for the area in which your home is located. Be sure to check the current FHA loan limits for your area when calculating your maximum loan amount.
5. Outstanding Mortgage Balance
If you have an existing mortgage on your home, it must be paid off with the proceeds from the reverse mortgage. Any outstanding mortgage balance will reduce the amount you can borrow. Therefore, the lower your existing mortgage balance, the more you may be eligible to receive in a reverse mortgage.