How Much Can I Borrow With a Reverse Mortgage?

I’ve been doing a lot of research on a reverse mortgage, and once I learned that I qualify for one because of my age and the equity in my house, I wanted to know how much I could borrow.

If you’re new to this Blog, my name is Bob, and I’ve been writing about what I’ve learned about reverse mortgages over the past several months.  I’m 65, married, and enjoying retirement in my home near the beach.  I found that a reverse mortgage has a lot of wrinkles and details that are important for borrowers to know, so I started this blog to share what I’ve learned.  Hopefully we can learn together, even if we don’t make the same decision about a reverse mortgage.

Let’s review the basics for a reverse mortgage:

• Must be at least 55 years old
• Must own home or have paid down mortgage by a significant amount
• Must live at home as the primary residence
• The bank pays you
• A reverse mortgage is a loan

So how much money will I receive if I decide to go with a reverse mortgage?  The answer is that it depends on a handful of factors.  

Age

I mentioned that I’m 65 and married.  My wife is 64, so we both qualify as borrowers for a reverse mortgage.  Lenders will use the age of the youngest spouse when determining the amount of a reverse mortgage.  So if you are older than 65 (or the youngest person in your marriage is older than 65), your age is actually an asset!  

Existing Mortgage Balance 

I own my home outright, but if you don’t, that’s ok.  As long as you’ve paid down your current mortgage by a considerable amount, you can still qualify.  The amount you get paid in a reverse mortgage may be lower if you have an existing mortgage though.  You’ll need to first satisfy the debt of your current mortgage, which may lower the amount you receive through a reverse mortgage.

Your Home’s Value

The loan amount will depend on the value of your home.  While there isn’t technically a lending limit, Home Equity Conversion Mortgage (HECM) limit that you can borrow against is $822,375 as of January 1, 2021.  To learn more about an HECM, check out my blog post here [link to post #4 - fees associated with a reverse mortgage].  This limit of $822,375 holds true even if your home’s appraised value is more than that.  

The Interest Rate of Your Reverse Mortgage

This may seem obvious, but the lower the interest rate, the more money you will receive via your reverse mortgage payments.

While everyone’s situation is different, these are some helpful guidelines that you can apply to your situation if you’re considering a reverse mortgage.  I would point out that it might be best to talk to a professional, like the folks at Equity Access Group, so that you can know the specifics for you.