Are You Eligible for a Reverse Mortgage?

For most seniors, the best news about a Reverse Mortgage is that there are currently no income requirements to qualify. These income requirements are subject to change in January 2014 where all borrowers will be required to undergo a financial assessment. And however, there are other strictly enforced eligibility factors for most Reverse Mortgages.

To be eligible for a Reverse Mortgage, you must meet the three main requirements:

1. Age: All titleholders on the home must be 62 years of age or older

2. Equity: The property must have sufficient equity remaining in it to eliminate any existing mortgages or liens using the Reverse Mortgage.

In practice, this means you generally must have at least 50% equity in the home in order to qualify, though the precise limit depends on your age.

3. Property Type: The home must be of a type approved by the FHA for Reverse Mortgages.

Property eligibility can complex. Reverse Mortgages are currently not available on co-ops, for example, though a change in that requirement is anticipated. Bed & breakfasts and working farms are also ineligible, as are manufactured homes built before 1976. The borrower must own the land the home is built on, the home must be on a permanent foundation, and the home must pass an FHA inspection.

As there are many quirks in determining property eligibility, it is best to speak with a loan officer before embarking on the process to make sure that your home is eligible.

These eligibility requirements are set by the Federal Housing Administration who operates and insures the Reverse Mortgage program.

  • Are You Eligible for a
    Reverse Mortgage?

  • Age of Youngest Homeowner:
    Home Value:
    Outstanding Mortgage Balance:
  • Are You Eligible?

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How Much Money Can You Get with a Reverse Mortgage

The amount of money you can access with a Reverse Mortgage is determined using a calculation that takes into account:

  • Your age
  • Current interest rates
  • The value of your property
  • Any outstanding mortgage or other lien on your property
  • Maximum loan limits as determined by HUD and the FHA

For example, in 2012 reverse mortgage payouts were near all time highs relative to homeowners' equity. This resulted from loan amounts varying in response to changes in interest rates. As the Housing and Urban Development's website put it: "the lower the interest rate, the more you can borrow." Fortunately for reverse mortgage borrowers, in 2012 interest rates were near all time lows, which means loan payouts relative to available equity were also near all time highs.

The proceeds from a Reverse Mortgage can be used in any way the borrower chooses. Some popular uses for the proceeds of a Reverse Mortgage include: improving the monthly household budget, healthcare, home repairs and outstanding bills.

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NewRetirement, Inc, Retirement Planning Service, San Francisco, CA NRMLA