Reverse Mortgage Limits: What They Mean to You

Before getting a reverse mortgage, you may desire to know about the reverse mortgage limits. These upper barriers could affect you depending on the value of your home. Actually, there are "hard" upper barriers and "soft" upper barriers.

A hard limit is the upper barrier set by the FHA. At this time, 90 percent of reverse mortgages are FHA backed. Therefore, the limits set by the FHA are very important.

At this time, the FHA upper limit varies from $200,160 and $362,790. The lower limits are used for rural areas and the upper ones for big cities or states where the living cost is more expensive. Also, the limit can be adjusted up to 150 % in Alaska, Guam, Hawaii and the Virgin Islands.

These upper barriers are raised every year. However, to have a realistic picture of how much you can expect to get, you have to understand about the soft boundaries. Soft ceilings restrain homeowners of high price houses to borrow more than those with homes around the FHA boundary and also set the actual amount you can get.

The soft boundary can be considered the actual limit for your house since it will set how much you can borrow. The amount that you can borrow is calculated from the lower of the appraised worth and the FHA boundary.

The actual funds owners can borrow depends on their age, the market rates, diverse credit fees and the appraised worth of their home or FHA's mortgage ceilings for their region. In general, the more valuable your home is, the older you are, and the lower the interest rates, the more you can borrow.

For instance, owners with a $100,000 loan at 9% interest could borrow up to 22% of the home's worth if they are 65. If the owners are 75, they could borrow up to 41%, and up to 58% if they are 85 years old.

In addition, consider that there are no asset or income limitations on borrowers getting a HUD's reverse mortgage. This basically means that you may have poor credit or earn no money or too much money and still be able to qualify for the loan. Nobody can be excluded because income, assets, or bad credit.

So, before you get a home loan, discuss it with your specialized mortgage broker about the reverse mortgage limits so that you can have a better representation of how much money you can receive by apply for this kind of mortgage.

By Igor Buces