Are You a Good Fit for a Reverse Mortgage? Take This Quiz and Find Out

iStock_000012314009SmallHave you been considering a reverse mortgage loan, but you’re not quite sure if it’s the right fit for you?

Home Equity Conversion Mortgages (HECMs) are insured by the Federal Housing Administration and allow qualified homeowners to borrow against the equity they’ve built up in their homes in the form of a non-recourse loan.

The non-recourse feature guarantees that you’ll never have to repay more than what your home is worth, in the event your loan balance eventually exceeds your home’s current appraised value. Thanks to the government insurance, you can rest assured that reverse mortgages are a safe financial product.

Still not sure? Take our quick, five-question quiz to assess whether you’re cut out for a reverse mortgage.

1. Are you (and your spouse, if applicable) 62 or older?

The federally-insured reverse mortgage program requires borrowers to be age 62 or older. In order to take out a reverse mortgage and remain on the home title, you and your spouse, if you have one, must both meet the age qualification.

2. Do you own your home outright, or own with a small mortgage balance?

The amount you can get from a reverse mortgage depends on a few factors, including your age, your home’s appraised value and the amount of equity you’ve built up, and current interest rates.

If you still owe a large amount on a “forward” mortgage, there’s less equity available for you to tap into. Conversely, if you own your home outright, you’ll have more equity to access.

3. If you do still have a mortgage, are you looking for a way to pay it off?

Are you are an older homeowner with an existing mortgage? A growing number of seniors are retiring with mortgage debt, according to a new report released by the Consumer Financial Protection Bureau.

Around 80% of people aged 65 and older are homeowners, but as of 2011, 30% of them were still carrying mortgages. Among homeowners age 75 and older, more than 21% still have mortgages.

Did you know you can use a reverse mortgage to pay it off and eliminate your monthly mortgage payments? The HECM program requires borrowers to repay any existing mortgage debt, but reverse loans do not become due and payable until you leave your home or pass away.

4. Are you planning on “aging in place,” and do you want to make any home modifications to achieve this goal?

A whopping 90% of people age 65 and older have indicated a desire to stay in their current home for as long as possible, according to AARP. If that describes you, a reverse mortgage could help you achieve your goal. Reverse mortgages can be used for funds to carry out certain home modifications to enable aging in place.

Remodeling to create a safer living environment could range from installing grab bars in strategic locations to creating low or no-threshold entries or even widening hallways and doorways.

5. Will you most likely be able to comfortably live in your home for the foreseeable future?

Like most financial products, reverse mortgages come with some upfront fees and costs. For many borrowers, the expenses associated with taking out a reverse mortgage are well worth it down the road. However, if you’re only planning on remaining in your home for a couple more years, or you think you may need to move soon because of health issues, then a reverse mortgage may not be the right fit for you.

If you answered mostly “yes” to the questions above, you may be a great candidate for a reverse mortgage and should run your scenario through our reverse mortgage calculator or speak with a prescreened lender that can answer all your questions.

Share this post:

Keep Reading

All Posts