A reverse mortgage may be a great way for homeowners to access the equity they’ve built up in their home over the years. One of the main factors that goes into determining eligibility and how much money you can receive is age.
Home Equity Conversion Mortgage
A Home Equity Conversion Mortgage (HECM), commonly known as a reverse mortgage, is a Federal Housing Administration (FHA) insured loan. A reverse mortgage enables borrowers to pay off their current mortgage loan which eliminates their monthly mortgage payments and can provide additional cash flow.1 The loan typically becomes due when the last surviving borrower dies, sells the home, or permanently moves out.
To be eligible, homeowners must be 62 years of age or older.
Non-Borrowing Spouse
For HECM loans that are insured by the FHA, an individual who is married to a reverse mortgage applicant and is living in the home as their primary residence is known as an eligible non-borrowing spouse. Upon passing of the last remaining borrower, an eligible non-borrowing spouse may be able to have the repayment of the reverse mortgage deferred if certain requirements are met.2
A spouse can be an eligible non-borrowing spouse by choice or due to being under the age of 62.
Proprietary reverse mortgage loans, commonly referred to as jumbo reverse mortgages, are designed for homeowners whose home values are appraised above the traditional HECM loan limit of $726,625. Jumbo reverse mortgages are not guaranteed by the FHA, so lenders don’t have to follow FHA guidelines. Some jumbo reverse mortgages allow homeowners to access up to $4 million (varies by lender).
Depending on the state, the minimum age requirement can be as low as 60 years of age. Please reach out to a direct-lender to review requirements.
To determine how much a borrower is eligible to receive with a reverse mortgage loan, lenders will look at the following three things:
- Age of the youngest borrower
- Home value
- Current interest rates
Typically, the older the borrower is, the more they will receive in proceeds than younger borrowers. The age difference in the amount of available loan proceeds is based on the notion that life expectancy for an older borrower on average will be less than that for a younger borrower.
If you are interested in learning more about how a reverse mortgage works, call 800-976-6211 to speak with a licensed loan advisor.
Disclosures:
1 Mandatory obligations are those fees and charges, as defined by the U.S. Department of Housing and Urban Development (HUD), incurred with the origination of the HECM loan that are paid at closing or during the first 12-month disbursement period. This includes but is not limited to: existing liens on the property; the loan origination fee; counseling fee; upfront MIP; third-party closing costs; customary fees and charges for warranties, inspections, surveys, engineer certifications; repair set-asides; set-aside for property taxes and insurance; and delinquent federal debt.
2 A spouse must meet the following requirements to be considered eligible: 1) Be the spouse of the reverse mortgage borrower at the time of loan closing and remain the spouse of the borrower for the duration of the borrower’s lifetime. 2) Be properly disclosed to the lender at origination and specifically named as a Non-Borrowing Spouse in the loan documents. 3) Occupy, and continue to occupy, the property securing the reverse mortgage as the principal residence.