Reverse Mortgages Maximum Loan-to-Value
Loan-to-value (LTV) is a term that refers to the ratio of a loan’s amount to the value of the property at the time the loan is taken out. For most “forward” mortgages (conventional mortgages that amortize regularly), the maximum loan-to-value ratio for loans without private mortgage insurance (PMI) ratio is typically 80 percent. Other conventional loans may have maximum LTV ratios that are higher or lower, depending on their requirements. For reverse mortgages, the LTV isn’t used as a stand-alone determining factor in getting approved. In most cases the figure works out to around 50 to 65 percent.
According to the information on the Department of Housing and Urban Development (HUD) website, the amount a homeowner may borrow in a reverse mortgage depends on the following:
- Age of the youngest borrower
- Current interest rate
- Lesser of appraised value or the Home Equity Conversion Mortgage (HECM) FHA mortgage limit of $625,500 or the sales price
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What About with Jumbo Reverse Mortgages?
While the HECM FHA mortgage limit is $625,500 (subject to change), there are jumbo reverse mortgages in which the borrower can access greater amounts of their home’s equity – but if you’re looking for a jumbo reverse mortgage, you may be disappointed, as they’ve become pretty hard to find. In the years of the credit crunch and strict lending practices due to the economic downturn and mortgage crisis, jumbo reverse mortgages became scarce. Even today, the main type of reverse mortgage is the HECM program.
Jumbo reverse mortgages are designed for senior homeowners who have high-value homes, allowing them to take more money out of their mortgage than they would in a typical HECM Standard program. However, it should be noted that jumbo reverse mortgages (also called proprietary reverse mortgages) are not insured by the government and are instead structured by private firms. They are still subject to certain regulations, but they are considered proprietary products offered directly through private lending institutions.
To learn more about reverse mortgage loans, reverse mortgage loan limits and eligibility requirements, contact us today at (855) 367-4326.