A reverse mortgage loan, like a traditional mortgage, allows homeowners to borrow money using their home as security for the loan. Also like a traditional mortgage, when you take out a reverse mortgage loan, the title to your home remains in your name.
However, unlike a traditional mortgage, with a reverse mortgage loan, borrowers don’t make monthly mortgage payments. The loan is repaid when the borrower no longer lives in the home. Interest and fees are added to the loan balance each month and the balance grows.
With a reverse mortgage loan, homeowners are required to pay property taxes and homeowners insurance, use the property as their principal residence, and keep their house in good condition.
Benefits of reverse mortgage
- can use the extra cash for medal or living expenses
- heirs don’t owe money in case the loan is more than the property worth.
- can choose either lumpsum or receive it monthly.
- easy to qualify.
- you remain as the property owner.
- no monthly mortgage payment.
Requirements to qualify for a reverse mortgage:
- Reverse mortgages have two primary qualification criteria—you must be at least 62 years old and you must own a significant amount of equity in your home.
- While the specific percentage of equity required varies across lenders, typically you’ll need 50%.
- There are no credit score or income requirements for reverse mortgages.
- The U.S. Department of Housing and Urban Development (HUD) requires all prospective reverse mortgage borrowers to complete a HUD-approved counseling session.
- Borrowers must also pay an origination fee and an up-front mortgage insurance premium.
- While not technically a requirement to get a reverse mortgage, you will need to pay property taxes and homeowners’ insurance once you have the mortgage.
What Is Required To Get a Reverse Mortgage?
- There are a number of requirements you must meet in order to qualify for a reverse mortgage. The most important of these relates to your age and the amount of equity you own in your home.
Your age
- Reverse mortgages are designed to allow older homeowners without other sources of retirement savings to access the equity they’ve built up in their home. Because of this, you must be at least 62 years old in order to qualify for a reverse mortgage. And if you’d like to add your spouse as a co-borrower (which you should do if you can), they must also be 62 years old.