Arizona Real Estate License Practice Exam

In a reverse mortgage, the primary factor that influences the amount of money available to the borrower is home equity. Home equity refers to the current market value of the home minus any existing mortgage balance or liens against it. In essence, the more equity a homeowner has built up in their property, the more funds they can potentially access through a reverse mortgage.

This amount available is calculated based on a formula that takes into account the home’s appraised value, the age of the youngest borrower, and current interest rates. As homeowners age and accumulate equity, they can tap into this asset to convert it into cash, which can be particularly beneficial for seniors looking to supplement their income during retirement.

Factors such as income level, credit score, and debt-to-income ratio are generally not considered in the same way they would be for traditional loans, making home equity the critical influence in determining how much money can be accessed through a reverse mortgage.