A reverse mortgage is a unique type of loan that many senior homeowners find quite attractive because this loan can be used to pay off the existing mortgage and use the remaining money however they like.

However, this loan comes with some strict qualification requirements and rules, which this article will examine in detail.

What is a Reverse Mortgage?

Very simply, a reverse mortgage is a type of loan that allows homeowners to borrow money against the equity of their homes. The money received from the reverse mortgage can be used to pay off an existing mortgage, and any money left over is theirs to spend however they wish. This is great for homeowners who have paid the majority of their mortgage and are looking to eliminate those monthly payments.

Depending on the terms of the loan, the financial responsibilities portion of the loan is put into an escrow account to hold the funds. The loan balance only becomes payable when the homeowners move, sell the home, or pass away. 

The most common type of reverse mortgage you’ve likely heard about is a home equity conversion mortgage (HECM) that is funded by the Federal Housing Administration (FHA).

Reverse Mortgage Requirements

• Age requirements: Reverse mortgages were created to help senior homeowners, and therefore, you will need to be at least 62 years old to qualify for this type of loan. If your spouse is younger than 62 years old, they will not have access to the proceeds from the loan.
• Financial requirements: To qualify, you should not have any bad federal debt, such as student loans or income taxes. You should also have enough payment to pay for things like homeowner’s insurance and property taxes.
• Mandatory counseling: HCEM loans require borrowers to attend provided counseling to discuss the financial ramifications of this loan and determine whether they are ready for the loan.
• Equity requirements: Homeowners need to own at least 50% of their home, which is their primary residence, to qualify, and the house, condominium, or townhouse must have been built after 1976. Up to four-unit properties can also qualify as long as the homeowners occupy at least one of the units.

Consult with the Mortgage Experts at Florida State Mortgage Group

If you’re ready to start the process of applying for a reverse mortgage or have questions, contact the team at Island Coast Mortgage. Call us at 239-214-7011 to book your free consultation.