Eligibility Requirements for a Reverse Mortgage

Over 62 year old couple. Eligibility Requirements for a Reverse Mortgage

If you are 62 or older and approaching the age of retirement, you may be worried about your finances and looking for ways to supplement your income. One way to increase your cash flow is to apply for a reverse mortgage loan. The money you receive from the equity of your home can help you pay for extra expenses such as medical bills, home remodeling projects, vacations, etc.  Read on to learn the Eligibility Requirements for a Reverse Mortgage.

Different Types of Reverse Mortgage Loans

The two main types of reverse mortgages are private single-purpose reverse mortgage loans and home equity conversion mortgages (HECMs).

  • Private single-purpose reverse mortgage loans can only be used to pay for home repairs, improvements, or property taxes. Most homeowners with a low or moderate-income can qualify for these loans.
  • (HECMs) are federally insured reverse mortgages and are backed by the U. S. Department of Housing and Urban Development (HUD). These loans are the most popular and can be used for any purpose.

How Much Equity Can You Get?

Due to current government laws, you can no longer borrow the full amount of your available home equity. You may only be able to access up to 60% of it due to the lender using it to pay off your existing mortgage and closing costs unless you choose to roll the closing costs into the loan balance.

The actual amount of money you will receive from a reverse mortgage loan is based on the age of the youngest borrower, the amount of equity in your home, and the current interest rate. A reverse mortgage specialist uses a reverse mortgage calculator to get a good estimate of how much money you can get.

How a Reverse Mortgage Benefits You During Your Retirement

Unlike a regular home mortgage, with a reverse mortgage, you do not make payments on your home’s principal. The method is reversed, and you receive payments from the equity you have in your home. With a reverse mortgage, you collect money in various ways until you borrow the maximum amount according to the Governments guidelines. There is no need to worry about being evicted from your home for non-payment. If you stay in your home, pay your property taxes each year and maintain the upkeep on your property, you can stay in your home for as long as you like.

How You Could Lose Your Home in a Reverse Mortgage

Even though it may be difficult, you can still lose your home with a reverse mortgage.  

Here are some specific circumstances that can cause you to lose your home:

  • Your home is no longer your primary residence.
  • You are away from your home for six months or longer for non-medical reasons.
  • You are away from your home for more than 12 consecutive months.
  • You pass away and no one else is listed on the loan as a co-borrower.
  • You quit paying property taxes and homeowner’s insurance.
  • You fail to maintain the home according to FHA specifications.

Various Ways to Get Your Money in a Reverse Mortgage

Depending on the type of loan you have, you may receive your money in one of the following ways:

Monthly payments – With this option, you can receive monthly installments that last throughout the lifetime of your loan. 

A lump-sum payment – You can receive all your money at once, in one large payment, when the loan closes. 

Line of credit – By choosing the line of credit option, you can access your money from a line of credit whenever you need it. 

A combination – You can customize your reverse mortgage payments by combining the various payment alternatives.

I hope that this information provided you with the necessary points on Eligibility Requirements for a Reverse Mortgage.

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