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Reverse Mortgage Requirements

June 2, 2018

The two essential reverse mortgage requirements one must have in order to obtain a this type of loan are age and property.  The borrowers must be at least 62 years old and they must live in a house they own or have title to.  That means, if you’re renting you would be not eligible for a reverse mortgage unless you own a house elsewhere and move back into that house and make it your primary residence.

 

You can also own more than one house, too, but you can only get a reverse mortgage on the property that you designate your primary residence.  You can only have one primary residence and one reverse mortgage at any given time.

 

What Are Some Other Reverse Mortgage Requirements:

The question always arises; What if you own your house but you have a spouse who is not 62 years or older but you are? What then? The answer is you can still get a reverse mortgage and include your wife in the deal as a non borrowing spouse.

 

Here it gets a little tricky but under the new rules non borrowing spouses can live on the property for the rest of their lives if they so choose and not be responsible for paying back the loan if something were to happen to the borrower.  They also can refinance into another reverse mortgage once they become 62 years old or sell the property and pay back the loan and use the remaining funds to pursue other endeavors.

 

Once those two essential reverse mortgage requirements are met, age and property, there are additional criteria that come into play.   For instance, even though the potential reverse mortgage borrower owns his or her house, they must have enough equity in that house otherwise they won’t qualify.  That means they could already have an existing loan or mortgage on the property – most homeowners do and typically this would be classified as a regular or “forward” mortgage – and the amount they owe can’t exceed the amount they qualify for with a reverse mortgage.

 

If they owe more than they would qualify for, they would not be able to pay off the existing loan with the proceeds of the reverse mortgage and that must be done.  Sometimes a borrower will come up with cash for the difference and that is allowed.  The benefits of paying of an existing mortgage can be tremendous in and of itself because it eliminates the monthly mortgage payments of a regular mortgage.  That money is now freed up and can be used for other purposes.

 

Other factors that could prevent homeowners from qualifying for a reverse mortgage:

Would be lawsuits, tax liens, non mortgage liens on the property that can’t be resolved in escrow, and the condition of the property.   Here at Reverse Your Mortgage we recently had a client who lived in a house where the foundation was flawed probably due to an earthquake many years prior.  The damage wasn’t enough to force the owner to move from the property – it wasn’t even noticeable when you enter the house – but upon inspection from an appraiser, who requested additional data from a structural engineer, it was determined there was structural damage and lenders demand that fundamental structural problems must be corrected in order to release funds.

 

In this case, the potential borrower could not afford to make those costly changes and therefore could not get the reverse mortgage.  Sometimes lenders allow a loan to go through with the condition that a portion of the proceeds be used to make necessary cosmetic changes to the house (painting, clearance, etc.) but not for large structural problems.

 

If you are not sure whether you qualify for a reverse mortgage, just take a moment and use our reverse mortgage calculator to analyze where you may be.

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