Eligibility for a Reverse Mortgage

I refinanced my house about a year ago, will this have an effect upon my eligibility for a reverse mortgage?

3 Answers

Your eligibility to obtain a reverse mortgage depends on:

  • your age: you must be 62 years of age or older;

  • the current mortgage balance: you must either own the home outright, or have a low enough mortgage balance that can be paid off at the closing with proceeds from the reverse loan - the reverse mortgage is dependent on the value or the equity in the home;

  • you must live in the home; and

  • you must go through a HUD-approved counseling prior to obtaining the loan.

Basically, the older you are and the more equity you have in the home, the higher the amount of proceeds you can realize from a reverse mortgage. Consequently, the younger you are the less equity you have, the lower the amount of proceeds you can realize from a reverse mortgage.

There are only two main factors in consideration of a reverse mortgage: age & appraisal.  Whether you refinanced last year or last week is not germane.  A reverse mortgage, and the most common one is HUD's Home Equity Conversion Mortgage [HECM], does have some minimum property standards.  But, the new nationwide limit of $417,000 brings the program into focus.  If the youngest homeowner is 62, then the appraised value of the home should give an idea as to whether or not the amount of equity available will be sufficient to pay closing costs and the balance of your mortgage.  There are calculators that can be found at numerous websites such as the AARP website, that can give you an idea as to whether or not a HECM can work for you.

Thank you for your question today.  The short answer to your question is...No.

A reverse mortgage is simply based on two things, Age of applicant and Equity in the property.  In today's market there is a challege with Reverse mortgages and it's not the age of the applicant.  It's equity. 

As long as you have a decent amount of equity in your home, you have a great chance of qualifying for a reverse mortgage.  There is no hard and fast rule about the amount of equity, since the age of the applicant plays a major role in the decision.  The older the applicant, the less equity is needed in the property.  Conversely, the younger the application, the more equity is required in the property.

Be sure to ask for many options when applying for a reverse mortgage.  There basically two types of reverse mortgages, fixed rate and variable.  From there, there are variations of each.  Each reverse mortgage loan product has its own requirements (in regard to equity required).

If you choose a variable rate product (most popular) be sure to ask what margin is applied to the index.  Also, be sure to ask what type of index is used for the reverse mortgage.  If you are a conservative homeowner, you will want to select a lower margin that is attached to the treasury index.  The other choice would be the LIBOR index (London Inter-Bank Offered Rate) which tends to be very volatile.

I trust this information was helpful.