The reverse mortgage allows seniors 62 years and older to tap into the equity in their home as a money source to fund various financial issues. These issues or hurdles, in most cases, consist of paying off a mortgage, covering large medical costs, supplementing income, helping family members, and the list goes on and on.

People always call me asking about the reverse and how much they can get to conquer their individual hurdles. Sometimes it is enough and sometimes not. The first thing to know is you must have a substantial amount of equity in the home for the reverse mortgage to make sense.

Reverse mortgage lenders use the equity in the home as security for the investment of loaning you money and allowing you to not make monthly interest payments. The mortgage company knows that interest will accrue against the equity and can strip away all of their security if the money is loaned without figuring the odds of that occurrence.

With this in mind the amount of proceeds or maximum claim amount a borrower may receive from their reverse mortgage is based upon three factors: appraised value, age of the youngest borrower and the interest rate.

The appraisal is pretty obvious. The lender must first determine what the home is really worth before they can lend money on it. This is done via an FHA licensed appraiser.

Interest rate is not so obvious, but if you think like a lender it will be. The higher the rate the quicker the equity will get stripped away. Conversely the lower the rate the more slowly that will happen. With this in mind as rates get lower the lender will lend more money and as it gets higher it lends less and less.

The lender uses the age of the younger borrower because the actuarial tables say he or she will live longer. Since the loan doesn’t end until that person sells or passes away the lender must assume the surviving spouse will live in the home until death. The longer that person lives the more time interest has to eat away at the equity. That being the case the lender lends the least amount to the youngest borrowers. Yes, if you’re 62 you are just a pup in the reverse mortgage game.

In the end borrowers can receive from 45% to 80% of the value of their home depending on these variables.