The equity needed for a reverse mortgage is calculated on the property having 39% of its market value or the assessed property value.
A reverse mortgage was conceived of originally as a means for lower income retired people to use the equity in their homes to pay for medical and other expenses while still collecting Social Security. Reverse mortgages are guaranteed by the federal government and are managed by HUD. No one needs anything more than a home with equity to qualify for a reverse mortgage, even a poor credit rating does not affect your being qualified for a reverse mortgage.
How is equity determined for a reverse mortgage?
If the property has an existing mortgage, the remaining value of the property is what you can expect to get in a reverse mortgage. If your property is assessed at $70,000 and your existing mortgage is $30,000, you can get $40,000 if the property is in your name and there are no other liens or obligations on the deed.
When would I not qualify for a reverse mortgage?
If your property is worth $70,000 and the existing mortgage is $50,000, you might not qualify for a reverse mortgage since $20,000 is less than the 39% equity figured for a reverse mortgage.
Were reverse mortgages designed with heirs in mind?
A reverse mortgage was meant to help the elderly to get proper medical attention and to care for themselves. The intent of giving the elderly as much in cash that they could use whichever way they wanted was in itself a direct indication that the needs of heirs were not a contributing factor to reverse mortgages. If the holders of the reverse mortgage spent all of the monies that they got from their homes equity before they died, at death the deed belonged to the mortgage holder to sell. If the proceeds exceeded the reverse mortgage, the excess would, of course, belong to the heirs.
Related posts: