How Does Reverse Mortgage Math Work? Read here to understand how the math behind a reverse mortgage works and how a lender decides how much they will give!
For many people looking to get a reverse mortgage understanding how the math works can be quite complicated. There are various factors that go into the math behind a reverse mortgage.
Your Age
The first aspect that goes into the math behind reverse mortgage proceeds is your age. While you only need to be 62 years old, you will get far more money in reverse mortgage proceeds if you wait until you are older. For example, if you are 62 and accept a lump sum payment you should only expect to get about 35% of your home’s value. If you wait until you are 72, that number will increase to about 50%.
Form of Payment
Another aspect that goes into the math behind reverse mortgage proceeds is the form of payment that you select. Upon approval, you will have the option to select a lump sum payment, a fixed monthly payment, or a line of credit. The lump sum payment option will provide you with the least amount of proceeds while accepting the fixed monthly payment will provide you with the most. This is because the fixed monthly payment is guaranteed to last you a certain period of time and is therefore less risky to the lender.
Value of Your Home
Another large determinant in the math behind how reverse mortgage proceeds are calculated is the value of the home. Depending on your age and form of payment, a lender will be willing to provide you with up to 80% or more of your home’s value. To determine the current value of your home the lender will require a current appraisal.
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