Reverse Mortgage Information


Cerritos Reverse Mortgage Question - What’s the Loan To Value on a Reverse Mortgage?

Sunset CruiseCerritos Reverse Mortgage Question - What’s the Loan To Value on a Reverse Mortgage?

I get this question all the time.  I know that most folks are hoping to hear a number from me like 60%, 80% even 100% of loan value, but that’s just not the way it works.

The loan amount (or principal limit) on a reverse mortgage is based upon a formula provided by HUD which factors in three elements:  AGE, HOME VALUE & EXPECTED RATE.

AGE - The age of the youngest borrower is used in the formula as a factor.  All borrowers must be over 62, but an older borrower will qualify for a higher loan amount than a younger borrower.

The reasoning for this is based upon life expectancy.  A younger borrower needs a bigger cushion of equityto allow for the eventual repayment of the loan.

HOME VALUE - The higher the loan value, the higher the loan amount up to and including a maximum home value of $625,500.  This doesn’t mean if your home is worth more you can’t get a reverse mortgage.  It just means that if you are getting a HECM the calculations will be done as if your homes value was $625,500.  If your home is worth considerably more than that you may want to research a Jumbo Reverse Mortgage which offers many of the same features and protections of the HECM.

EXPECTED RATE - Not the interest rate on the loan itself, the Expected Rate is just that, what the borrower can “expect” the interest rate to average.  Easy to figure on the fixed rate reverse as it matches the interest rate on the loan. It’s a bit more complex on the adjustable. The expected rate for an Adjustable HECM is figured on the 10 Year Libor Swap and the Interest on the loan is figured on the 1 Month Libor index.

I hope that you found this information helpful!  Here’s how to get your own Reverse Mortgage Information Kit.




By Deborah Nance


Your Local Southern California Reverse Mortgage Professional

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Equal Housing Lender

iReverse Home Loans, LLC, NMLS#810502 originates reverse mortgages in Alabama, Alaska, Arizona (MB-0919584), California, Colorado, Connecticut, Florida, Illinois, Indiana, Iowa, Kansas, Louisiana, Maryland, Massachusetts, Minnesota, Mississippi, Missouri, Nevada, New Jersey, New Mexico, Ohio, Oregon (ML-5378), Pennsylvania, South Dakota, Tennessee, Texas, Utah, Vermont (1164-MB), Virginia, Washington and Wisconsin. 

Important Information: Reverse Mortgages are neither "endorsed" nor "approved" by the Federal Government. The FHA (Federal Housing Administration) provides certain insurance benefits for lenders and borrowers in connection with the lender’s HECM loans; the FHA does not make or originate loans. The owner(s) retain title to the property that is the subject of the reverse mortgage until the person sells or transfers the property and is therefore responsible for paying property taxes, insurance, maintenance and related taxes. Failing to pay these amounts or failure to maintain the condition of your property may cause the reverse mortgage loan to become due immediately. A reverse mortgage is a complex loan secured by your home. Whether such mortgage makes sense for you depends on your financial situation and needs. For these reasons, we strongly recommend that you consult with a qualified independent housing counselor, family members and other trusted advisers before making this decision. This website is not from HUD or FHA and was not approved by HUD or any government agency.

Comment balloon 2 commentsDeborah Nance • January 28 2012 04:57PM


Hi Deborah,

Question for you, has the overall calculation ratio changed at all in the last few years? Meaning with they loan an individual less because of decling prices? Has that changed at all?

Posted by Lynda Eisenmann, Broker-Owner,CRS,CDPE,GRI,SRES, Brea,CA, Orange Co (Preferred Home Brokers) over 7 years ago

Hi Lynda,  Yes there have been some changes in the past few years.  The annual mortgage insurance has increased from .5% to 1.25% in Sept of 2010 and the Principal Limit Factors (loan to value ratios) also declined a bit.  Both items made the reverse mortgage more "conservative" helping to protect the loan program for the future.  They also introduced the HECM SAVER, a smaller, less expensive and very useful reverse mortgage. 

Posted by Deborah Nance, Southern California , Reverse Mortgage Specialist (Orange County, Corona, Riverside, Los Angeles) over 7 years ago

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