Many people who are interested in obtaining a reverse mortgage loan are disappointed to find out that they can't get as much money out of their homes as they had originally hoped they would be able to obtain. Sometimes this is due to the fact that they don't entirely understand the way mortgages, home equity and associated fees all work together. However, it's often due to the constraints placed on the loans themselves.
When taking out a reverse mortgage loan, you're going to be dealing with "floors" and "ceilings" that have been worked into the legal side of reverse mortgage lending. The "reverse mortgage floor" is a number equal to slightly less than half of the conforming loan limit. The "reverse mortgage ceiling" is a similar number equal to just under ninety percent. What this means is that your loan will fall somewhere between 50% and 90% of the conforming loan limit regardless of the actual value of your home equity.
For most people, this isn't actually a problem. The majority of people who own properties that are more expensive than the average across the nation are not people who are in a financial position to require them to need a reverse mortgage loan. However, in parts of the country where housing costs are particularly high (such as New York or San Francisco), this may pose lending problems for some consumers.
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Question of the Day: Do you know how much money you would be able to access through a reverse mortgage loan?
