Q: What is a reverse mortgage?
Simply stated, a reverse mortgage is a mortgage loan that pays a homeowner from the accumulated equity of the home.
Q: What makes it a “reverse” mortgage?
A reverse mortgage is exactly what its name implies — a loan whose features make it essentially the reverse of a traditional “forward” mortgage. Instead of making monthly payments, you can choose to receive them. That’s the “reverse” part of a reverse mortgage. Instead of turning your income into equity, you turn your equity into income.
If you are at least 62 years old and have low or no outstanding mortgage debt, a reverse mortgage can allow you to borrow against the equity you’ve built in your home. That’s the “reverse” part of this kind of mortgage loan. Instead of making monthly payments, you can opt to receive them!
That last feature — the ability to turn your equity into income — is what most distinguishes a reverse mortgage from other loans, and what makes it so valuable to many senior homeowners. Having spent years repaying the mortgage that allowed you to buy your home, you can now tap into that investment to help you achieve your goals later in life. However you plan to use your equity — whether traveling, paying medical expenses, improving your home, or just adding a bit of cushion to your monthly budget — you’ll have a golden opportunity to put your nest egg to good use.
Q: Who is eligible?
In order to apply for a reverse mortgage, there are no credit, employment, down payment or income requirements. Eligibility, therefore, is simplified as follows:
1. At least one homeowner must be 62 years old or older and occupy the property as their primary residence. If another younger person less than 62 lives in the home, he/she cannot be listed on the title.
2. The property may be owned free and clear or have an existing mortgage balance.
3. The home must meet minimum Housing and Urban Development (HUD) property standards. If not, some repairs may be necessary with some of the reverse mortgage money.
4. Single-family homes, townhouses, condominiums, manufactured homes built after June 1976, multi-family homes, planned unit developments (PUDs) and co-ops may be eligible. Some properties, however, are excluded such as mobile homes, motor homes, house boats, yachts, multi-families with more than four units, manufactured homes built before June 1976 and timeshares.