Eligibility
To be eligible for a reverse mortgage, you must meet specific standards. You must be 62 years old or older and have owned your house for at least one year (those with existing mortgages may also qualify). To qualify, your home must be your principal residence and fulfill the minimum property standards set forth by the United States Department of Housing and Urban Development (HUD). Property must be a single-family or one to four-unit dwelling occupied solely by the owner of the property. All eligible properties include townhomes, detached homes, condominium units, planned unit developments (PUDs), and some manufactured homes and new construction properties.
Benefits of Taking Out a Reverse Mortgage
Enables you to remain in your house while maintaining ownership of the property.
It eliminates all mortgage payments.
Allows you to spend the money in whatever way you choose.
Provides funds for home repairs
Aids in the repayment of existing debt
Provides money to cover medical expenditures and long-term care insurance.
Enables you to participate in additional leisure activities
Makes it simple to gain access to the equity you have built in your house.
Provides funding to help you improve the quality of your life.
Medicare and Social Security benefits are unaffected by this policy. (While reverse mortgage cash advances may have an impact on eligibility for other programs, the proceeds are typically tax-free and do not affect Medicare or Social Security benefits in most cases.)
Impact of Income on Eligibility
Since a reverse mortgage does not require monthly payments, there are no income criteria for a reverse mortgage, as there are for a standard mortgage or home equity loan.
Costs connected with a Reverse Mortgage
In addition to interest, there are a variety of extra fees and expenses to consider. There is often an origination charge and a mortgage insurance premium, title insurance, and attorney expenses, all of which can be rolled into the loan amount as a line of credit. As part of the agreement, you will be required to continue paying your homeowner's insurance premiums and property taxes, as well as maintaining the property to FHA standards.
When does the Reverse Mortgage Loan Have to be Paid Back?
Your loan will become due and payable if you fail to pay your property taxes and insurance, or if you fail to maintain the property, permanently move out, sell the home, or fail to reside in the home for a period of 12 consecutive months during which time you have failed to pay your property taxes and insurance.
The Amount left to the Heirs
The amount of equity you have left in your house after repaying your loan depends on various circumstances, including the
size and frequency of your loan advances,
increases or decreases in the value of your home,
future interest rates, and others.
You or your estate are responsible for repaying the lender for the money you received, plus interest and fees, if any. It is up to you or your estate to decide how to repay the loan: with other assets, through refinancing, or through the sale of the property. If the house is sold, any proceeds over the loan debt are yours or your heirs' to keep if the house is not sold.
Frequently, the adult children are relieved to see their parents continue living in their homes and relieved to know that their parents are financially secure as a result.
