A reverse mortgage can be a convenient way for accessing the equity in your home without having to sell or move. A question that is often asked by homeowners considering this option is how much equity do I need to get a reverse mortgage?
Reverse mortgages generally make the most sense for seniors who have been in their homes for a long time or own the home outright. For homeowners who currently have a mortgage against their home a reverse mortgage may be a viable option if they have a considerable amount of equity (50% or more). The reasoning behind this is that you must be able to pay off an existing mortgage with the loan proceeds from a reverse mortgage.
Besides figuring out how much equity you need to get a reverse mortgage, you should consider other factors to help you determine if a reverse mortgage is a viable option for you. For example:
- Your Age: You have to be a homeowner at least 62 years or older to qualify for a reverse mortgage. Generally, the older you are the greater percentage of your equity you can borrow. However, for planning purposes, there is no reason you can’t start looking into a reverse mortgage before you reach age 62.
- Credit History & Property Charge Payment History: All lenders must perform a “financial assessment” as dictated by the Department of Housing and Urban Development (HUD) to determine your capacity to continue to pay for housing-related expenses such as property taxes and insurance, as well as your ability to manage your financial obligations.
If you currently have difficulties making ends meet and/or have a poor credit history, the lender may not be able to approve your loan without withholding a portion of the loan proceeds to pay for property taxes and insurance on your behalf. This can be a challenge if you currently have a mortgage and the amount you qualify for is not sufficient to cover both.
- Your Income: This is related to the item above. You must have enough income coming in to keep up with the long-term loan obligations of paying your property taxes and insurance, HOA fees (if applicable), and maintaining your home according to the Federal Housing Administration (FHA) standards.
- Property Type & Residence Status: A reverse mortgage can only be obtained if your property type is eligible, the condition of the property meets FHA standards, and it is occupied as your primary residence. Eligible property types include:
- Single Family Residence
- Multi-Unit Property
- FHA-approved condominium
- Manufactured home that meets FHA requirements
To find out if a reverse mortgage is a viable option for you fill out the calculator above or call 1.800.976.6211