Reverse Mortgage Guide
Reverse mortgage eligibility requirements are quite simple. There are no income, employment or credit qualifying restrictions.
- All homeowners must be age 62 or older and occupy the property as their principal residence.
- The home must be owned free and clear or have a remaining mortgage balance that can be paid off by the reverse mortgage.
- The property must be a single-family or a one-to-four unit, owner-occupied dwelling.
- Townhomes, detached homes, condominium units, planned unit developments (PUDs) and some manufactured homes are eligible.
- The home must meet Department of Housing and Urban Development (HUD) minimum property standards. In some cases, home repairs can be made after a reverse mortgage closing.
How Much Can Be Borrowed?
In most cases, maximum reverse mortgage loan amounts are based on the following factors:
- The age of the youngest homeowner
- The appraised value of the home
- The current interest rate
- The locally established lending limit
In general, the older you are, the more your home is worth, and the lower the interest rate, the more you’ll be able to borrow. Ask your reverse mortgage consultant for further details.
Reverse mortgage customers have differing needs. Some would rather receive their entire loan amount up front, while others prefer a steady monthly stream of funds to supplement their other income. Regardless of how you choose to receive your proceeds, you can adjust your plan as often as you wish to accommodate changing needs.
Reverse mortgage funds-distribution plan options include:
- Lump Sum — A specific amount is made immediately available (often used to pay off an existing mortgage).
- Term — Funds are released in set monthly amounts for a set period requested by the customer.
- Tenure — Loan proceeds are distributed in equal monthly allotments for as long as at least one customer continues to occupy the home as a principal residence.
- Line Of Credit — Funds remain available for the customer to draw on as needed.
- Combination — Customers receive any combination of lump sum, monthly, or line of credit distributions.
Reverse mortgages are variable-rate loans. In most cases, you may choose monthly or annual adjustments. Interest rate adjustments have no effect on the number of loan advances you can receive, but they do cause your loan balance to grow at a faster or slower pace.
Please ask your reverse mortgage consultant for details about when repayment may be due. The balance due can come from home sale proceeds, or from other resources, such as savings, insurance or possibly applying for a new mortgage. There is no requirement that the home be sold, only that the loan be repaid.
Effect On Other Benefits
Reverse mortgage loan proceeds are not considered income and will not affect Social Security or Medicare benefits. However, receiving monthly reverse mortgage advances could affect your eligibility for some public assistance programs that are based on need. Consult a local attorney to determine how — or if — a reverse mortgage funds-distribution plan might apply to your specific situation.