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Reverse Mortgages
Reverse mortgages have been around for many years. The programs have been enhanced and now have FHA and HUD backing which makes them more popular as a vehicle for long term retirement planning.
What is a reverse mortgage?
A reverse mortgage is a special type of home loan that lets a homeowner convert a portion of their home's equity into cash. Unlike a traditional home equity loan or second mortgage, no repayment is required until the borrower no longer uses the home as a principal residence.
A reverse mortgage can:
- Remove all monthly mortgage payments
- Add supplemental monthly income
- Add a line of credit for unforeseen expenses
- Provide financial security that allows the borrowers to live in their primary home for the rest of their lives regardless if one or more of the borrowers passes
Who qualifies for a reverse mortgage?
Any U.S. citizen or Non-permanent Resident Alien, 62 years of age or older, that owns a primary home with a sufficient equity position.
Do you need good credit and income to qualify?
The answer to both is no. While a credit report is requested on each file this is more to look for potential liens against the property. The borrower's payment history has no bearing on qualifying for this loan. Income is requested but is also not used for qualification of the loan.
Do all types of properties qualify for reverse mortgages?
No, Second Homes, Investment properties, true Condo-tels, Mixed Use properties and Mobile or Manufactured homes not attached to a permanent foundation will not qualify. In addition rental properties with more than 4 units and homes on leased land will not qualify. Condominiums in projects not approved by FHA are not eligible for the FHA Home Equity Conversion Mortgage, along with certain older mobile and manufactured homes.
What types of properties qualify for a reverse mortgage?
Single family dwellings or 2-4 unit property that you own and occupy as your primary residence. In addition, town homes, detached homes, units in condominiums and manufactured homes are eligible. Condominiums must be FHA approved and the manufactured homes must be attached to a permanent foundation.
What are the benefits and risks of reverse mortgages?
The Office of Thrift Supervision has published an informative article that outlines some points for those interested in a reverse mortgage to consider. Please click here to view the article.
If you are considering a reverse mortgage, we recommend a no-obligation meeting with our Mortgage Lending Specialist to answer any questions you may have.
