Reverse Mortgage BasicsSometimes referred to as a home equity conversion mortgage, reverse mortgage loans allow senior homeowners who are at least 62 or older to use the equity in their home to receive payments from a lender or bank. The key benefits that differentates a reverse mortgage between a traditional mortgage is that no income is necessary to qualify and homeowners are the ones receiving monthly payments instead of homeowners making monthly payments on traditional home loans.
The reverse mortgage is not due until the homeowner decides to move out of the home, sells the home or is no longer living. Keep in mind that property taxes and homeowners insurance are still required to be kept current. A handful of seniors ended up having their homes foreclosed because they took out all the cash available from the mortgage and do not allocate enough to pay the property taxes. As a result, government guidelines are now in place that require banks to determine if borrowers' may have trouble paying for property taxes and insurance. If so, some of the reverse mortgage proceeds are set aside to pay for the property taxes and home insurance, similiar to an escrow account.
Note that income is not used to qualify for a reverse mortgage, only to determine if any funds need to be set aside to pay for property taxes and insurance.
Reverse Mortgage Requirements
- Borrowers must be 62 years or older
- Borrowers must live in the property
- Property must be a single family, townhome, 2-4 unit properties, HUD approved condo or manufactured homes (built after June 1976). Note that co-ops do not qualify.
- Complete a reverse mortgage counseling session. Search HUD's approvend counseling agencies
- Property must have equity