Being Eligible For A Reverse Mortgage

Often people ask different questions to clear their doubts about reverse mortgage programs. Most of these queries, however, pertain to the criteria required to qualify for a reverse mortgage. Mentioned below are a few frequently asked questions (FAQ) in this regard that may be of use to those who are looking for an ideal reverse mortgage. This will particularly help them to find out what makes them eligible for a reverse mortgage and what does not.

Accessibility of product: Has the creditor offered his products in your locality?

All questions related to the subject of qualifying for a reverse mortgage turns out to be hypothetical if the creditor does not proffer his reverse mortgage products in your locality. Nevertheless, even if a particular reverse mortgage product is not available in your area, you may still keep on learning about it with a view to acquire it on a future date when it is made accessible to you. It is very likely that the lender may introduce the product in your area sooner or later. You may even study the different aspects of that particular reverse mortgage products and compare them with other similar reverse mortgage products available in your vicinity. In addition, you may also consider the availability of a particular reverse mortgage product while taking a decision on purchasing your next house. Hypothetically speaking, you may always acquire a private reverse mortgage plan in your locality and hence it is advisable to continue with your explorations.

Assessment of your home: Is the creditor setting the lowest or highest agreeable value for your property?

It has been found that in addition to the existing criteria, the creditors often include an additional ceiling for qualifying for his reverse mortgage products by laying down the lowest and/ or the highest value for the homes or property.

Principal for lowest reverse mortgage: Is it necessary to mortgage a minimum sum or fraction of equity?

Yes, the fact is that a reverse mortgage lender is very much entitled to lay down a minimum loan limit.

Time period and payment scheme alternatives: What are the available time frame and imbursement schemes?

There are several options and you are free to select either a fixed-term reverse annuity mortgage or a term-plan reverse annuity mortgage. Alternatively, you may also choose a combination of a term-plan reverse annuity mortgage and a reverse mortgage line of credit. It is advisable to stay away from taking any sudden decision. Instead, it will be wise to explore every alternative and assess its influence on your way of life as well as your level of affluence. It is essential that you evaluate each of the available reverse mortgage products cautiously with a view to find out the ones that fulfills your present requirements and also offer you protection and suppleness in the years to come. In fact, the nature of agreement between the lender and the borrower spells out the purpose and type of a reverse mortgage product. Always remember that a commercial creditor will never be as willing to make as many adaptations in a reverse mortgage as a private lender. This is primarily owing to the fact that a commercial lender is bound by the policies of his company.

Age prerequisites: What is the minimum age to qualify for a reverse mortgage?

Most lenders plan their reverse mortgage products in such a manner that both the lender and the borrower may derive benefits from it in terms of monetary returns. Normally, maintaining the other pre-requisites as a constant, any person between the age of 60 and 65 years is eligible for a reverse mortgage. However, the minimum age requirements for fixed-term reverse mortgage is lesser, the lowest age constraint for a term-plan reverse mortgage is comparatively high. In the instance of a married couple seeking a reverse mortgage, the lender may either fix the age of the younger spouse for eligibility or use the average of their combined ages for the same. It is also possible that the lender will not lay down any age pre-requisites for procuring his reverse mortgage plan. Significantly, there is no upper age ceiling for procuring a reverse mortgage product and people as old as 100 years are also free to go for a reverse mortgage. What is, however, important to note is that the amount of the reverse mortgage equity up front payment essentially depends on the life expectancy projections of the borrower. In fact, the more the age of the home owner, the higher returns he or she receives. In brief, reverse mortgages are most effectual for people who are 70 years old or more.

Category of home proprietorship: Is my kind of home ownership eligible for a reverse mortgage?

Since all creditors always want the utmost security of their money invested in reverse mortgage loans, they usually look for property without any strings attached. While separate or isolated and semi-detached homes are on the top of their priority list, lenders also extend reverse mortgage on condominiums or apartments and town houses that are considered to be in fee simple estate. The creditors may also offer reverse mortgage for a duplex provided the owner is occupying one of the two units. Nevertheless, co-operatives or co-ops do not qualify for a reverse mortgage as the home owner does not possess sole rights on the co-op. In the case of co-operatives, all members of the co-op or corporation who administer the property have equities and the owner of the co-op has the privilege to inhabit only one unit or apartment in the property. Currently, even the mobile homes as well as other retirement property where the land is not owned, but granted on lease, are also not qualified for reverse mortgage.

Prevailing mortgages: Will an existing traditional mortgage prevent getting a reverse mortgage?

As mentioned earlier, lenders or creditors always want the maximum security of their money lent out on a reverse mortgage. Hence, it is very natural that the lenders would also want the reverse mortgage to be the original mortgage enlisted against the property or home. If a traditional mortgage exists against a property and the home owner still wants to procure a reverse mortgage, he or she would then first need to clear of the liabilities of the traditional mortgage and then apply for a reverse mortgage. In fact, all lenders not only persist on this aspect, but also want that the borrowers provide first-claim importance to the reverse mortgage. There are other lenders who may permit a property tax rescheduling plan to be listed against the property before or after the reverse mortgage has been organized. In such instances, the amount obtained from the reverse mortgage may be used to clear the liabilities of the prevailing traditional mortgage. This enables the home owner to get rid of the monetary burden of making recurring payments against the traditional mortgage.

Shared borrowers: Is a property eligible for reverse mortgage if it is owned by more than one person who is not a married couple? Should the owners who are not related possess the home in a shared occupancy to enable the surviving proprietor automatically gain hold as per the right of survivorship?

It may be mentioned here that the lenders may not consider any property possessed by common-law couples of people living together as a family without any marital relationship eligible for reverse mortgage. In addition, if one of the joint borrowers or owners of a property is found to be below the minimum age qualifying for a reverse mortgage, the lender or mortgagee may then ask the entire equity of the property to be transferred in the name of the senior partner whose age qualifies for the reverse mortgage. In such an instance, no lender will offer reverse mortgage on half the property owned by the eligible partner. Hence, anyone who is now living alone needs to assess his or her position vis-à-vis qualifying for a reverse mortgage if they acquire new housemate or if a relation or friend comes to stay with them permanently to take care of them.

Utilizing the up front equity payment: Will the lender have any control on the utilization of the equity advances and, if yes, does the borrower have to seek the lender's approval each time he or she spends any money from the advance payment?

According to the normal practice, the lenders do not have any say on the manner in which a home owner would like to spend his or her equity advance amount. While the home owners are free to use their equity up front amount as they wish, some lenders do exercise some control on how the borrowers spend the advance money obtained from reverse mortgage. These lenders may put a ceiling on the use of the equity advances only what they consider 'sensible' expenditure. Such 'sensible' or 'worthwhile' expenses may include taxes, medical expenses, home improvement, funeral cost and other such spending.

Income corroboration: Do the lenders need any income corroboration or a credit check on the home owner(s) while approving a reverse mortgage?

As per the reverse mortgage rules or home equity conversion principles, a lender pays the home owner(s) an equity advance that is secured against the property and not the income of the borrower. However, the rules in the instance of traditional mortgage are different and there the lender gives the equity advance against the income of the home owner. Nevertheless, the law gives the lenders certain liberties and they are allowed to include any decisive factor in the reverse mortgage that they may find essential for the security of their investment or ensure the eligibility of a home owner to avail a reverse mortgage product. For instance, if a lender is proffering reverse mortgage to comparatively younger home owners who are below the age of 60 years, the borrower's income may also become an important criteria for qualifying for the reverse mortgage product offered by that particular creditor.

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