If a home has a reverse mortgage on it for $XXXK, does that mean that at the time the mortgage was taken, the house had to appraise for that amount?
We're looking to buy a house and when I did a search of land records, found that the house had a reverse mortgage taken on it in March 2006 for a certain amount. The house is selling for FAR less than that amount, and I want to understand that March 2006 figure.
Nothing I've read on reverse mortgages explicitly explains what the maximum amount of a reverse mortgage can be, although my own common sense says that of course, you shouldn't be able to borrow more than the amount of equity in the home at a given point in time. But hey, we're talking about the la-la- fantasy housing land of 2005-2007 LOL.
But perhaps there are other factors? I am trying to understand whether I can use that March 2006 figure as the basis for comparing price from then to now. I know the owner had 100% equity in his home, so can I assume that in March 2006 some lender appraised the house out at $XXXK, the value of the reverse mortgage?
First, the value of a house in 2006 has absolutely NO bearing on what it is worth today. A lot of buyers spend a ton of time looking at how much the house last sold for, how much the existing mortgage is, how much it appraised for in the past, etc. It's all about MARKET VALUE which is determined by comparable sales - that is, RECENT sales of similar properties in the area. You are wasting your time looking at anything else as a determinant of value.
Having said that, yes, there are limits on reverse mortgage amounts, but they are based on a combination of age, current interest rates, other loan fees and the appraised value of their home or FHA 's mortgage limits for their area, whichever is less. Generally, the more valuable your home is, the older you are, the lower the interest, the more you can borrow. In any event, the limit would most certainly be lower than the value of the home at the time the loan was extended.
Are you sure that it was a true reverse mortgage?
mbzoltan
Member
posted: Aug. 12, 2008 @ 12:18p
I'm well aware of your first paragraph--thanks. We've done our research and right now, in terms of comps in the area, we're getting a good price on this home. It's selling for substantially less than assessed value and about 10-15% less than market value comps. It's an estate sale, and they're trying to move fast, so it was priced nice and low and we happened to be the first to see it. Inspection went well, and now we're waiting for closing in the next few weeks. We're settling in for the next 10-20 years and locked in a solid 30-year rate in early July.
Second, according to the county land records, it was a reverse mortgage. I know the seller had full equity in the place, was in his late 80s. I'm VERY surprised by the amount of the reverse mortgage; this is more about curiosity, as the reverse mortgage amount that he received is more than 60% higher than the house price now.
This is more a curiosity at this point; I'm trying to understand how this guy got a reverse mortgage for so much.
TheLoanDoctor
New Member
posted: Aug. 13, 2008 @ 7:22a
If the figure you get from your research is from title insurance, then that figure will be much higher than the amount of the loan. The Reverse Mortgage lenders have us put 150% of the max loan amount as the figure for the title insurance.
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