Reverse mortgages are a special type of loan that enable borrowers who are at least age 62 to convert some of their home equity into loan proceeds that can be used for any purpose including daily living expenses, health care, and travel. Eligibility requirements are as follows:
* All homeowners must be age 62 or older.
* The homeowners must occupy the home being used to secure the reverse mortgage as their principal residence.
* The property must be a single-family home or a one-to-four unit, owner-occupied building (this includes condominiums, town homes, and some manufactured homes).
* The home must be owned free and clear, or the borrowers must refinance an existing mortgage balance into the reverse mortgage loan.
* Borrowers are required to obtain an eligibility certificate by receiving counseling from a HUD (Department of Housing and Urban Development)-approved agency.
Note there are generally no employment, income, or credit score eligibility requirements. However, verification of income is required when a reverse mortgage loan is used to complete a home purchase transaction — in other words, when a reverse mortgage is combined with other assets so that a home with a reverse mortgage is owned free and clear. Here is an example: when borrowers combine $150,000 profit from the sale of their current home with $150,000 of reverse mortgage proceeds to close on a new home for $300,000 (used to secure the reverse mortgage) with no monthly mortgage payments.
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