Can anyone take out a reverse mortgage loan? | Consumer Financial Protection Bureau (2024)

FAQs

Can anybody get a reverse mortgage? ›

Reverse mortgages require that applicants be at least 62 years old and own a significant amount of equity in their home. Applicants typically need 50% equity to qualify for a reverse mortgage. There are no credit score or income requirements for reverse mortgages.

A reverse mortgage can't be transferred to another borrower. However, co-borrowers on the mortgage can keep it and remain in the home. Certain non-borrowing spouses are also eligible to remain in the home, although they won't receive further payments from the reverse mortgage.

You won't qualify for a reverse mortgage if you are behind on payments for federal loans, such as federal student loans or income taxes. Proving that you'll use the reverse mortgage proceeds to pay off these debts might still allow you to qualify for the loan.

This denial can be possible if the property taxes are behind, or other reasons even if the credit record is clean. For those who were denied a reverse mortgage, they should consider the benefits of working with a broker like PS Financial Services, especially with the financial assessment looming.

This means your heirs can pay off the loan by selling the home for at least 95 percent of the home's appraised value. The rest of the loan is covered by the mortgage insurance that the reverse mortgage borrower paid during the duration of the loan.

According to this rule, the initial amount that a homeowner can borrow through a reverse mortgage is limited to 60% of the home's appraised value or the maximum claim amount, whichever is less.

The problem, say advocates, is that many senior homeowners don't understand the fine print in a reverse mortgage. Some wrongly assume the lender will pay the taxes and insurance. But fall behind on those payments or fail to maintain the home, and the lender can foreclose.

No. When you take out a reverse mortgage loan, the title to your home remains with you. This webpage has information about HECMs, which are the most common type of reverse mortgage. Most reverse mortgages are Home Equity Conversion Mortgages (HECMs).

The reverse mortgage lender cannot do anything that the owner of the property does not agree to allow the lender to do when the loan is originated. If you are on the loan with your mom, then you also have the right to stay in the home for as long as you wish.

While a reverse mortgage lets you access your equity without selling your house right away, it can be financially risky: A reverse mortgage increases your debt and can use up your equity. While the amount is based on your equity, you're still borrowing the money and paying the lender a fee and interest.

How much income do you need to get a reverse mortgage? ›

Although you don't need income to qualify for a reverse mortgage, you do need to show the lender that you have the means to afford the ongoing costs of homeownership, including property taxes and homeowners insurance premiums. You'll also need to keep your home in good repair.

No, reverse mortgages are not scams. They are legitimate loans designed for seniors, but it's essential for borrowers to fully understand how they work. Interest accrues on the loan over time and is repaid when you leave the property.

But the risks can be serious — reverse mortgages come with high upfront costs and can make you ineligible for some government benefits. Plus, since the loan has to be repaid upon your death (which often means selling the house), you may not have an inheritance to leave for your heirs.

Yes, inheriting a house with a reverse mortgage is possible. If a loved one decides to take out a reverse mortgage on the home, and then chooses you as the heir to that home, then you would inherit the home with the reverse mortgage on it.

When you sell your home your reverse mortgage loan will need to be paid back. If you decide to sell your home while you have a reverse mortgage loan, you will have to pay back the money you borrowed plus interest and fees.

Who is not a good candidate for a reverse mortgage? A reverse mortgage is a questionable proposition if you have sufficient income to pay your bills or are willing to sell your home to tap into the equity. If that's the case, it may make more sense to just sell it and downsize your home.

But the risks can be serious — reverse mortgages come with high upfront costs and can make you ineligible for some government benefits. Plus, since the loan has to be repaid upon your death (which often means selling the house), you may not have an inheritance to leave for your heirs.