There are many benefits of reverse mortgages for retired persons. A reverse mortgage is a loan in which a homeowner receives a loan off the equity in their property.

The nice piece is the borrower doesn’t pay a monthly fee on the loan or the interest. The loan and interest are repaid when the borrower dies or sells their house and the bank takes the proceeds.

For a retiree, a reverse mortgage can be a great way to build a cash emergency fund or help stretch a fixed income. You may wonder who can get a reverse mortgage. You will need to meet a handful of requirements to get the reverse mortgage started. Below are the typical reverse mortgage requirements to get approved.

Age Requirement

To get a reverse mortgage approved you must be at least 62 years old. This is imposed by the government to make sure their mortgages are used the right way. They are meant to be used by seniors to use the value in their homes. They are not for others to exploit their land to get a flexible loan. In the case of multiple co-borrowers, the youngest borrower must be over 62. If you have a spouse or partner who is not yet 62 you can avoid this by not including them in the reverse mortgage. If you do this be prepared though. If you predecease such a partner, the house will be sold by the bank without regard to their comfort. This requirement sees to it that only seniors can access this opportunity.

Ownership Requirement

You need to own your home to get a reverse mortgage on it. You may be able to get one if you are still paying down a mortgage, but the equity in the house will have to be enough to also pay down that mortgage. The bank will want to make sure there is no debt on the house before they take it as collateral. From their perspective, these loans work because your houses equity will likely increase as time goes on. If they can’t recoup their investments because the house’s value is tied up in another mortgage, they will not take the risk. For the best chance of securing the reverse mortgage, you need to own the house and land outright.

Financial Requirements

Another requirement is that you prove you can pay all the cost associated with the house. Check out this calculator here https://reverse.mortgage/calculator to find out your payments. A reverse mortgage requires that the house remains sellable for the duration of the loan. As a result, you must continue to pay taxes, upkeep, insurance, HOA, and any other fees on the house. The good part of this requirement is that if you keep up these costs, the bank can’t renege on loan payments. These payments will ensure that after your death, the bank will have no trouble selling the property and making their money back.

House Type Requirement

The government stipulates that only certain sorts of houses can be used in a reverse mortgage. First of all, the house must be your primary residence. You cannot live anywhere else for more than 12 consecutive months. It must be a single-family home, or a multi-unit home where the owner lives in one unit. It cannot be a condominium except under specific circumstances. The house also cannot have been built before 1976. A reverse mortgage also cannot be applied to properties that draw income, like bed-and-breakfasts or working farms. The rules controlling what properties may or may not be reverse mortgaged are complex. They are designed to prevent people from taking advantage of the system.

HUD Counseling

Before a bank can even begin the application process, you must have a session with a Housing and Urban Development (HUD) counselor. This counselor will outline all the parts of the reverse mortgage process. They will also make sure you are aware of all retirement planning alternatives to a reverse mortgage. HUD insists on these counseling sessions to make sure a bank is not exploiting you and you know what you are agreeing to. Once they are satisfied you know what you are trying to do, they will give you a signed form saying you went through the counseling and have made an educated decision. With this, the bank can begin the process.

These are the major requirements to get a reverse mortgage. You must be at least 62. You must own the home you are mortgaging, without a significant mortgage left to pay off. Prove that you can pay all the taxes and fees associated with the house. Your house will have to be an approved type. Then, attend a HUD counseling session. With these requirements fulfilled, you’ll be able to move on and apply for the reverse mortgage you desire.

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