What You Need to Know Before Applying for Reverse Mortgage

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Here's what you need to know about reverse mortgage requirements:

  1. Age and Equity

To qualify for a reverse mortgage, you must be at least 62 years old and have sufficient equity in your home. Equity is the difference between the value of your home and the outstanding balance on any mortgages or liens. The more equity you have, the more you may be able to borrow.

  1. Occupancy

You must live in the home as your primary residence in order to qualify for a reverse mortgage. If you leave the home for more than 12 months, the loan may become due and payable.

  1. Counseling

Before applying for a reverse mortgage, you must participate in a counseling session with a HUD-approved counselor. This counseling is designed to ensure that you understand the costs and risks associated with a reverse mortgage, and that you have considered all of your options.

  1. Financial Assessment

As of 2015, lenders are required to conduct a financial assessment of all reverse mortgage applicants. This assessment is designed to ensure that you have the ability to pay for ongoing property taxes, insurance, and other expenses associated with homeownership.

  1. Property Requirements

The home must be your primary residence, and it must meet certain property standards. This includes being in good condition and meeting all applicable building codes. If the home is in need of repairs, the repairs must be completed before the loan can be approved.

  1. Loan Limits

The amount you can borrow with a reverse mortgage is limited by the value of your home, your age, and current interest rates. The maximum amount of equity that can be borrowed is $822,375 as of 2021, but this limit may change each year.

  1. Repayment

A reverse mortgage must be repaid when the last borrower moves out of the home or passes away. The loan may also become due and payable if you fail to pay property taxes or homeowners insurance, or if you let the home fall into disrepair.

In conclusion, a reverse mortgage can be a powerful financial tool for seniors who have significant equity in their homes. However, it's important to understand the requirements and responsibilities involved in a reverse mortgage before applying. By working with a trusted lender and participating in HUD-approved counseling, you can make an informed decision and protect your financial future.

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