Home equity is the market value of a home minus mortgage debt and other encumbrances. If your home is valued at $175,000 and you have outstanding mortgage(s) totalling $75,000, then your home equity is $100,000. The longer a borrower has been making payments on a home, the greater the home equity accumulated. Also, the more the home has increased in market value, the greater the home equity accumulated.

The home value used in the reverse mortgage process will be determined by a professional appraisal (that you will pay the fee for). But in advance of this, you should be able to get a good idea of your home’s value by doing a little research using one or more of the following free resources:

-Use the remarkable database of information available at www.zillow.com. This tool will give you tax assessment values and/or recent sales information for your home as well as for other homes in your area-all displayed on an aerial photograph or map. This tool is still being refined so information for some areas is spotty. Still it is a great place to start.

-Your City or County Assessing Office - With a quick phone call to your local assessing office, you can get the specific property value used for property tax purposes. Be aware, though, that the quality and timliness of assessment information varies widely across the country. Still, this is a good place to begin. You may also be able to obtain actual sales prices for homes similar to yours that sold recently. This is the same information that the appraiser will use and can give you a very good idea of your home’s
market value.

-Sunday Newspaper - Look at asking prices on homes similar to yours in the same neighborhood and then reduce these prices by 10%.

-Get a Free Appraisal from a Real Estate Agent - This can be a useful information source, but be prepared for the obligatory sales pitch.

Once you’ve determined your home’s value, it’s a simple matter of subtracting the outstandfing mortgage balance to arrive at your home equity.

But while home equity is an key factor (along with life expectancy and interest rates) in determining how much you can get from a reverse mortgage, don’t expect to be able to borrow a high proportion of your equity. The liklihood is that your reverse mortgage loan amount will be somewhere between 35% and 70% of your home equity, depending on the other variables and on the specific reverse mortgage product.

The good news is that now armed with your home equity information, you can visit any one of several online reverse mortgage calculators to get a more precise handle on what a reverse mortgage can mean to you.

Most of the reverse mortgage calculators you’ll find on the internet are licensed from the same company and are identical in terms of the output generated. For example, the calculators at popular reverse mortgage sites such as AARP, Wells Fargo and the National Reverse Mortgage Lenders Association (NRMLA) are basically all the same. The calculator at Freedom Financial is different in that it outputs a helpful side-by-side comparison of all three major reverse mortgage programs: HUD Home Equity Conversion Mortgage (HECM), Fannie Mae Home Keeper, and Financial Freedom’s own Cash Account program.

Finally, it is important to know that, unlike regular home equity loans which typically are a second lien (priority) position to the primary mortgage, reverse mortgages always are the first (and only) lien on the property. This means that if you have a mortgage balance - even a small one - it will have to be paid off either in advance of getting the reverse mortgage or at closing with proceeds from the reverse mortgage.

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A Few More Related Articles of Interest:

How Much Can You Borrow With A Reverse Mortgage?

Reverse Mortgage Information from the National Association of Mortgage Brokers

Will Reverse Mortgages Rescue Baby Boomers?

Why the Name “Reverse” Mortgage?

Is a Reverse Mortgage Right for Me? New Guide Available