Before we get into the answer to that question, it is vital to realise that the sum of money that you are able to borrow via the use of reverse mortgage information is primarily determined by the following three factors:
- The age of the borrower who is the youngest.
- Your property's current market worth.
- Rate of interest at the moment
When it comes to reverse mortgages, the general rule of thumb is that the borrower's age will determine the amount of the borrowing percentage. For instance, a client who was 65 years old at the time of the application may borrow approximately half of the value of their property. They might potentially borrow 56% of the value of their home if they waited until they were 70 years old. This was during a time when interest rates were approximately 3.5 percent. Although many people are familiar with the first two criteria, the third component, which is interest rates, is the one that has the most substantial bearing on a borrower's ability to obtain further financing. As a consequence of this, the amount borrowed as a percentage of total assets has drastically reduced since the year 2021's conclusion due to the significant increase in interest rates. Therefore, a client who is 65 years old can no longer borrow approximately half the value of their property as they once could; instead, they are now restricted to borrowing around 42.4% of the value of their home. The entire availability of one's home equity will be reduced by around 7.5% as a result of this. For instance, this indicates that a person aged 65 can borrow $44,000 less money to purchase a home with a value of $550,000. On the other hand, property values have increased significantly over the course of the past year, which is a positive trend. Therefore, the amount of money that an individual can access might be lower percentage-wise, but if the home appreciated by 10%, they would really be able to borrow more money in the end.
In general, despite the fact that interest rates have increased significantly since the beginning of the first quarter of 2022, and taking into account the significant home appreciation that has occurred over the course of the previous two years, now is an excellent time to investigate the various home financing options that are available. It is anticipated that interest rates will rise even further this year, and as a result, the amount of money that can be accessed from a person's property will continue to decrease. Please do not wait; instead, call us as soon as possible with any questions you may have or to make an appointment for a free consultation to discuss your available choices.
Last but not least, and this point cannot be emphasised enough, an increase in interest rates does in fact have a beneficial effect on individuals who already have a reverse mortgage that comes with a line of credit. The reason for this is because the interest rate causes the total amount of available money in your line of credit to increase over time. As a result, an increase in the rate of interest results in an increase in the quantity of money you have available, and this increase occurs at an increased rate.
0
