Los Angeles Reverse Mortgage Lending Limit versus Payout

Episode 1 transcript: How Much Can I Get From a Reverse Mortgage? Value vs. Cash | Ep. 1

In this episode:

• 0:00 Home value versus usable cash
• 0:25 The value used in a HECM calculation
• 0:58 Borrowing capacity comes before cash
• 1:31 Is unused credit already debt?
• 2:05 Four questions to ask about an estimate
• 2:31 Start with your own numbers

Your home is worth a million dollars. What could a reverse mortgage actually put in your hands? Your home value alone can't tell you. Before you can answer, you need to separate four things: the value used in the calculation, your borrowing capacity, the cash you can access and the debt you would owe. Let's put those on screen, so you know which number to look for when you review an estimate.

Let's focus on a HECM, the FHA-insured reverse mortgage. You'll hear that pronounced heck-um. For a HECM on a home you already own, the starting value is generally the lower of the applicable appraised value or the national HECM limit. That starting value is called the maximum claim amount. The national limit is updated by calendar year. It is a ceiling used in the calculation, not a promised payout. A home worth more than that ceiling doesn't automatically create a larger HECM starting value.

Next, that calculation base is multiplied by an FHA factor. The factor depends on the applicable age and expected interest rate. The result is your initial principal limit. Think of it as gross borrowing capacity before money is disbursed. It still isn't your spending cash. Existing eligible mortgage debt, financed closing costs and any required reserves can reduce what remains available. The payment plan and first-year rules then affect when you can receive funds. Each step answers a different question.

if an estimate shows an unused credit line, is that whole amount already debt? No. Your outstanding balance reflects money advanced to you or paid on your behalf, plus interest, mortgage insurance and applicable charges. Undrawn credit is available borrowing capacity under the loan's terms. It isn't cash already in your account. Financed closing costs may create an opening balance before you take spending cash. Watch these two panels: available to borrow and already owed. They answer different questions.

Here's a useful way to read an estimate. What value did the lender use? What gross capacity did that produce? How much can I access now and later? And what would I owe? Imagine an offer that shows a large principal limit but never identifies cash at closing. To see the full picture, ask for a breakdown. Makes it easier to compare offers without guessing.

The point of an estimate is to connect the loan to your actual goal, whether addressing an existing mortgage or planning for future expenses. Your home's value alone can't answer that question. If you'd like to explore what a reverse mortgage can do for you, use the link in the description to visit our reverse mortgage calculator. In one minute you get an instant written breakdown of capacity, costs, cash access, and starting debt. An estimate is free and a starting point, not a loan approval.

Episode 2 transcript: Reverse Mortgage Age Rules: Which Spouse's Age Counts? | Ep. 2

In this episode:

• 0:00 Which age and rate belong in your estimate?
• 0:29 HECM age requirements and spouse status
• 1:04 How age affects borrowing capacity
• 1:32 Expected rate versus note rate
• 2:04 Compare the same starting assumptions
• 2:39 What to ask before requesting an estimate

You're 74, your spouse is 67. Which age belongs in your reverse mortgage estimate? For a HECM, the FHA insured reverse mortgage, the calculation uses the youngest borrower or eligible non-borrowing spouse. That detail can affect the amount. And age is only part of the picture. The rate used to size your loan may have a different job from the rate charged on your balance. Let's separate those inputs before you compare offers. HECM borrowers generally must be at least 62 at closing. Other reverse mortgage programs start at 55 years old. The factor calculation uses the age of the youngest borrower or eligible non-borrowing spouse. Being an eligible non-borrowing spouse is a different role from being a borrower, so don't assume you can leave a younger spouse out of the conversation to obtain a larger number. Ask how that spouse is being classified, whose age is being used, and what protections conditions apply. Those details belong in the written discussion. Age helps select the principal limit factor. With other assumptions held constant, older applicable ages generally support greater initial borrowing capacity. But this is a comparison of different ages under the same assumptions. It's not a promise that waiting for your next birthday will deliver a certain increase. Rates, the property value, and program rules can change. Ask the lender to show the applicable factor, rather than treating age as a fixed percentage of your home's value. Now suppose a lender quotes an interest rate. Here's the question to ask: is that the rate used to size my initial capacity or the rate charged on my balance? For an adjustable rate HECM, the expected rate helps size capacity. The note rate is used to charge interest on outstanding debt under the loan’s terms. They aren't automatically the same. For a fixed rate HECM, They are equal. Now, ask which rate you're seeing and how any future adjustments are limited. Imagine comparing two estimates that use different property values, different spouse assumptions, and different rates. A larger headline amount wouldn't tell you which offer is better. First line up the assumptions. Then compare gross capacity, cash available, costs, and how the balance may change. Paying off a larger existing mortgage reduces what remains afterward. It doesn't change which age belongs in the FHA factor calculation. Keeping those steps separate helps you see why the final cash figures differ. You don't need to memorize the FHA tables to have a useful conversation. Take one question with you. Which person's age and which rate did you use, and can you show me how they affect my estimate? If you'd like to begin with your situation, use the link below to visit our reverse mortgage calculator. Have information about both spouses ready. The next useful step is a clear written explanation of the assumptions, not a guess based on age alone.

Episode 3 transcript: Reverse Mortgage Costs: What's Left After Your Mortgage Payoff? | Ep. 3

In this episode:

• 0:00 Is the headline amount your cash?
• 0:10 Illustration: subtract the mortgage payoff
• 0:44 Mortgage insurance and closing costs
• 1:17 Financed fees versus out-of-pocket costs
• 1:45 What set-asides are for
• 2:24 The breakdown to request for your estimate

You see $200,000 on a reverse mortgage estimate, and you wonder, is that how much I get? Before you make plans for it, let's see where that money goes. Say that $200,000 is your borrowing capacity. We'll use made-up numbers to keep this simple. You still owe $120,000 on your mortgage, so that much goes toward paying it off. Now we're down to $80,000 before the other items. Next, let's allow $15,000 for costs added to the loan and $5,000 set aside for a specific purpose. That leaves $60,000. But hold on, we haven't checked when you can actually receive it. So don't read that as $60,000 in your bank account at closing. Now you may be wondering what's in those costs. With a HECM, the upfront mortgage insurance is 2% of the maximum claim amount. That's the calculation base. There's also annual mortgage insurance: half a percent of the outstanding loan balance charged over time. So those two percentages are based on different amounts. You may also see an origination fee, an appraisal, and title charges. The HECM origination fee can't be more than six thousand dollars, but that doesn't cap your entire closing bill. Now, if someone says you don't need to bring cash for a fee, ask how it's being paid. The fee may still be there, just added to the loan. When you finance a fee, it uses loan proceeds and increases what you owe. If you pay it out of pocket, you're using your own money instead. Either way, let's get every cost spelled out. And look beyond closing day, because interest and other charges continue over time. You may also see money set-aside for repairs, servicing, or property charges. Think of it as money earmarked for a particular job. It isn't extra spending money. A life expectancy set aside or LESA can reserve funds for certain taxes and insurance. The lender's review of your finances helps determine whether you need one. Setting that money aside doesn't automatically mean all of it is already debt. You still have responsibilities, including taxes, insurance, and keeping the home in good condition. A set-aside doesn't necessarily cover every property expense. So let's ask for four things on that estimate. The payoff, the costs, the set-asides, and what you can actually access. Then ask what becomes debt now and what might be advanced later. To start with your own numbers, use the calculator button below this video. Have your approximate home value and mortgage balance ready. Then get a written breakdown so you can decide whether it fits your needs.

Episode 4 transcript: Reverse Mortgage Payout Options: Cash Now or Later? | Ep. 4

In this episode:

• 0:00 Why the timing of cash matters
• 0:27 First-year access: an illustration
• 1:05 Why the first-year result can differ
• 1:18 Lump sum, credit line or monthly payments
• 1:55 Later access and the questions to ask
• 2:21 Explore the amounts and timing for your plans

What if you need money for a home repair now, but want a cushion for later? With a reverse mortgage when you get the money matters just as much as how much you can borrow. For a HECM, the FHA-insured reverse mortgage, there are limits on what can be paid out during the first 12 months. That includes required payments like paying off your old mortgage. So the first-year limit isn't all cash for you to spend. Let's use an adjustable-rate HECM and some made-up numbers. Say the starting borrowing capacity, called the principal limit, is $150,000. For this example, use 60% as the first-year limit. We'll assume no set-asides reduce it. That gives us $90,000 for the first year. Now suppose $60,000 goes to the mortgage payoff and other required costs. That leaves up to $30,000 for you during those first 12 months. That's why I'd ask to see the amount you could actually receive after the required payments. Some cases allow a higher first-year limit and set-asides can change the result. Have the lender show your numbers. And remember, we're talking about the whole first year, not just closing day. Let's say you only need part of the money now. You'd like the rest available if something comes up. That's where your payment plan matters. With a fixed-rate HECM, you receive your cash in one lump sum. There isn't a credit line to draw from later. An adjustable-rate HECM can offer a credit line, monthly payments, or a combination. With a credit line, you can request money when you need it, within what's available and the loan's terms. Monthly payments can run for a period you choose. A tenure plan offers ongoing monthly payments, as long as the loan stays in place and you meet its conditions. And you don't automatically get another check when the first year ends. What you can draw later depends on your plan and the loan's terms. That's why I'd start with your plans. What do you need at closing? What might you need during the first year? And what would you rather keep available for later? Ask for those amounts separately when you review an estimate. Then you can see whether the payment plan fits what you actually want to do. If you'd like to start with your own numbers, use the calculator button below this video. Then we can look at how much you may be able to receive and when.

Episode 5 transcript: Reverse Mortgage Credit Line Growth: What Actually Grows? | Ep. 5

In this episode:

• 0:00 What credit-line growth really means
• 0:27 A hypothetical five-year growth illustration
• 0:57 Available credit is not deposited cash
• 1:08 What changes when you draw $40,000
• 1:30 Interest applies to the outstanding balance
• 1:55 Conditions for continued access
• 2:10 Compare flexibility with the loan costs

What if your reverse mortgage credit line gets bigger while you leave it alone? That can happen with an adjustable-rate HECM, the FHA-insured reverse mortgage. It means you may have more room to borrow later. It doesn't mean the bank paid you interest. Think of two separate numbers: what you can borrow and what you already owe. Credit line growth can increase the borrowing room. Taking money out adds to what you owe. For this made-up example, we're past the first year and $100,000 is available as unused credit. We'll assume 6% interest plus half a percent in annual mortgage insurance. That's a 6.5% annual growth rate, calculated monthly. If those rates stayed the same, with no withdrawals, new fees, or new set-asides, you'd have about $138,000 available five years later. Actual rates can change, so this is an illustration, not a forecast. That bigger number is credit you could borrow. It's not money deposited into your account. Continued access depends on keeping the loan in place and meeting its conditions. Now suppose at that five-year point you decide to take $40,000 out. Using our rounded figures, the available credit drops from about a hundred thirty eight thousand to about ninety eight thousand. The forty thousand you take becomes an advance added to your loan balance. The unused part can keep growing under the loan's rules. You aren't charged interest on credit you haven't drawn. Interest and mortgage insurance apply to the outstanding loan balance. And you may already owe money for a mortgage payoff or financed closing costs, even before taking cash for yourself. So a higher interest rate isn't simply good news because it makes the credit line grow faster. It can also increase the interest cost on what you owe. You still need to live in the home as required, pay property taxes and insurance, and keep it maintained. When you get an illustration, ask to see available credit and projected debt separately. Have the lender show the rate assumptions too. If you'd like to start with your situation, use the calculator button below this video. Then we can look at whether that future flexibility fits your plans and the loan's costs.

Episode 6 transcript: Do You Still Own Your Home With a Reverse Mortgage? | Ep. 6

In this episode:

• 0:00 Ownership and a HECM mortgage lien
• 0:28 Taxes, insurance, maintenance and occupancy
• 1:00 When repayment can become due
• 1:24 Borrower and non-borrowing spouse roles
• 1:54 Heirs and HECM non-recourse protection
• 2:15 Moving plans, alternatives and counseling
• 2:37 Match an estimate to your household plans

Does getting a reverse mortgage mean you're giving up your home? With a HECM, the FHA-insured reverse mortgage, you still own it. The lender has a lien on the property, just as it would with another mortgage. While you meet the loan's conditions, you generally don't have to make monthly principal and interest payments. That can help your monthly budget. Interest and other loan charges still add to what you owe. Here's what I wouldn't want you to overlook. Look, the property taxes and homeowners insurance still need to be paid. HOA dues and other property charges may apply too. You still take care of the home too, including the everyday repairs that come up. And it needs to remain your principal residence. So when we look at an estimate, I'd also ask whether those ongoing expenses fit your budget. Falling behind on the requirements can make the loan due and could lead to foreclosure. What if your plans change? If you sell, the loan generally needs to be repaid. Repayment also generally becomes due when the last borrower permanently moves out or passes away. Spouse protections can change how that works. A long stay in a care facility can matter too. Ask how the occupancy rules would apply to your household before you need that answer. What about your spouse? Their role on the loan matters. If you're both borrowers, a surviving borrower can generally stay and continue receiving loan payments while meeting the requirements. A spouse who isn't a borrower has different protections. An eligible non-borrowing spouse may be able to postpone repayment if the conditions are met. But that doesn't give them access to new loan advances. Have the lender confirm your spouse's status in writing. And if your children hope to keep the house, talk about repayment now. They may need their own financing when the loan becomes due. There's also a protection called non-recourse. With a HECM, the lender can't pursue other assets to cover a shortfall. But the family still has to settle the loan to keep the house. I'd also want to know how long you expect to stay. If a move is coming soon, upfront costs may make another option a better fit. Downsizing, other financing, or waiting may be worth comparing. HECM borrowers must meet with a HUD-approved reverse mortgage counselor. Bring your family questions and someone you trust if you'd like. Want to see what this could look like for you? Use the calculator button below. Then we can look at the estimate alongside your household budget and family plans. You can explore the numbers before deciding whether to move forward.

Episode 7 transcript: HECM vs. Jumbo Reverse Mortgage: Compare More Than the Maximum | Ep. 7

In this episode:

• 0:00 Is the bigger headline the better offer?
• 0:16 HECM and private jumbo options
• 0:54 Align the starting assumptions
• 1:20 Mortgage payoff, loan costs and reserves
• 1:36 Cash at closing, year one and later
• 1:47 Debt, repayment and household protections
• 2:06 What to have ready for an estimate

Say you're looking at two reverse mortgage estimates. One shows a bigger number at the top. Would you pick that one? I'd want to know what that number actually gives you. How much could you use? When could you use it? And what would you owe? For a higher-value Los Angeles home, that conversation may include both a HECM and a jumbo reverse mortgage. A HECM is the FHA-insured program. It has HUD rules for things like borrowing limits, mortgage insurance, and payment options. A jumbo is a private reverse mortgage. It may offer more borrowing capacity on a higher-value home, but the terms depend on the particular product. So I'd ask to see its rates, costs, draw options, and spouse protections in writing. A jumbo isn't FHA insured, and we shouldn't assume it works just like a HECM. Before comparing the offers, start with the same home value and borrower details, so we're looking at the same situation. Check the ages used, how your spouse is treated, and the date of each estimate. Ask whether the rates are fixed or adjustable, and how they could change. If the assumptions differ, have the lender explain why. Otherwise, a bigger number could simply come from a different starting point. Now, put that headline number aside for a minute. Ask what has to go toward your current mortgage, what the loan costs, and whether money is being reserved. Have the lender separate costs added to the loan from anything you'd pay out of pocket. Then ask what you could actually receive at closing, during year one, and later. Somebody who needs a larger amount now may want something different from someone keeping a cushion for later. I'd also compare how the debt could grow, what makes repayment due, and what happens to a spouse or heirs. And ask what happens if the home eventually sells for less than the debt. Have the lender explain the non-recourse protection in that specific loan. You don't need a perfect file to start asking questions. Have an approximate home value, your current mortgage balance, your ages, and your spouse's information handy. Tell me what you'd like the money to do for you and when you'd need it. If leaving the home to family matters, let's include that in the conversation. Use the calculator button below to explore your own numbers. It's a starting estimate, not an approval or a substitute for appraisal and underwriting. Then we can look at the available options and ask for written breakdown. You don't have to make the decision from one big number. Let's look at what the offer would actually mean for you.