Tennessee Reverse Mortgages Limits
A reverse mortgage is a home loan for seniors over the age of 61 that does not have to be repaid until the borrower sells the home, dies or moves out for a period of 12 months. The only commercially available reverse mortgage is issued through a Federal Housing Administration (FHA) program. Banks implement the program through issuing mortgages that are insured and regulated by the FHA. Limits on the FHA reverse mortgage, called the Home Equity Conversion Mortgage (HECM), were made national instead of regional in 2008, which has allowed many more borrowers in states like Tennessee to make use of equity in high-priced homes.
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Loan Limit Changes
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Prior to 2008, reverse mortgage loan limits varied between regions and applied a maximum appraised value of just over $200,000 in most parts of the country, reflecting the median national home price. In high-priced areas, the limit was $417,000. In 2008, regional differences were eliminated and the $417,000 cap was applied nationwide. In 2009, as part of the American Recovery and Reinvestment Act, the national cap was raised to $625,500 and later extended through September 30, 2011. The way the cap works, if your home appraises for $625,500 or more, the figure used to determine the maximum loan is $625,500. If it appraises for less than $417,000, the actual appraised value is used in the formula that determines the maximum loan amount. Other factors included in the formula are the borrower's age, the loan type and the interest rate.
Age Limits
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The older you are, the more money you are eligible for in a reverse mortgage. At age 62, the youngest age at which you can take out a reverse mortgage, you would be able to take out just under 60 percent of the value of your home in a lump sum loan. At age 72, you would be able to take out about 64 percent. AARP has a reverse mortgage calculator that allows you to estimate your maximum loan amount based on all the criterion considered in the formula, based on the interest rates in effect at the time you use the calculator.
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Loan Type Limits
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A reverse mortgage can be a lump sum, line of credit or monthly payments. The lump sum loan can be a fixed interest rate or an adjustable rate. The loan type affects how much money you will be allowed to take out. In most circumstances, you will be given the largest loan amount with a lump sum based on a fixed rate. However, if you take out a line of credit, the unused maximum loan amount available actually grows each year by a quarter point in interest beyond the interest you pay on the used balance.
Tennessee Reverse Mortgages
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Because the loan cap of $625,500 is now national and not based on regional differences in median home value, this is the maximum appraised value that could be used for any reverse mortgage taken out in Tennessee. If your home in Nashville appraises at $450,000, then that is the value figure on which the loan amount would be based. Your age, loan type and interest rate would determine the maximum loan amount you would be offered. As of late 2010, a 62-year-old taking out a lump sum based on a fixed interest rate would be offered $264,279.
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