What is a reverse mortgage? Simply put, these specialty mortgages are equity loans created to produce income for senior homeowners, yet without a monthly payment. What this means is that homeowners over the age of 62 can create income by tapping into equity built up in their homes over the years.
If my description of a reverse mortgage sounds like you could start receiving stable income vs. making monthly house payments, you heard correctly!
Who is eligible? If you are over 62 years old, live in your home, have a decent amount of equity, and your existing mortgage is close to being paid off, you may qualify. Similar to a traditional 'forward' mortgage, credit history, income, assets, living expenses, and timely payment of property taxes and homeowner's insurance are also verified before issuing an approval.
Now that we've discussed who is eligible for a reverse mortgage, let's look at some parameters to this unique financing for seniors.
Do you know this answer? Since reverse mortgages require no repayment by the homeowner, how does the loan get repaid by heirs?
For the answer to this question, go next to Reverse Home Mortgage Information and Your Heirs.
By Jerry C. from Tulsa, OK
The homeowner is on the deed and his wife is not on the deed. The wife is under 62 years of age.
Can the homeowner qualify for a Reverse Mortgage? He is 80 years old.
HUD states that homeowners need to be at least 62 years old to be eligible for the reverse mortgage program. Having a spouse under 62 will not prevent loan approval but the spouse would not be listed on the mortgage.
Although rules have changed protecting certain nonborrowing spouses (and are subject to more change in the future), you must read the fine print very carefully to determine if the wife will qualify to remain in the house should the loan be called due and payable, for example, due to the death of the husband.
See FHA Reverse Mortgage Rules: Nonborrowing Spouses for more information.
By Najla L. from Mableton, Georgia 30126
Kate, I plan to refinance my home in 2014. I also plan to do a reverse mortgage in 2017 when I turn 62.
My question is, does it matter if the refinance loan in 2014 is a 15 or 30 year loan or VA loan? Is there a length of time that I must have on the refinance loan before I can do a reverse mortgage?
Thanks for you help.
For a home that is currently financed to be eligible for FHA's HECM reverse mortgage...
The type of mortgage to be paid off is not a consideration.
There is no seasoning guideline on the age of current financing, although individual lenders could add their own requirement called an overlay. See Infuriating Lender Overlays for an explanation.
The balance of the loan must be paid off in full at closing with the reverse mortgage proceeds, cash, or gifts from family members.
As you may suspect, the appraised value is pivotal to the reverse mortgage approval decision. In fact, this is usually considered the most important qualifying parameter.
One of my Readers recently asked me how to increase his appraised value. Go here for my 7 property appraisal tips.
And remember, you can also Ask Kate a question!
Important: Senior homeowners should consult a financial planner, tax accountant, and/or attorney as applicable to evaluate their circumstances before financing with a reverse mortgage. Even if not a loan requirement, reverse mortgage counseling is highly recommended.
January 2016: The Mortgage Forgiveness Debt Relief Act Update.
September 2015: Fannie Mae and Freddie Mac Improve Loan Modifications.
Keep on the right path at A Homeowner's Survival Guide to the Intimidating Mortgage Process.
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Aug 11, 16 10:49 AM
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