What is a Reverse Mortgage?

A reverse mortgage allows persons age 62 and older who own a home to use the equity in their home to create tax free income to be used for any purpose. The homeowner is not required to make any payments on the loan until he or she moves out of the home, at which point the proceeds from the sale of the home are used to pay off the obligation. Homeowners can elect to draw down the proceeds in several ways, including via a lump sum payment, a line of credit or fixed monthly payments.

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Qualifications for Reverse Mortgages

Persons age 62 and older who own a home qualify for these loans. There are no income requirements and there are no monthly interest/principal payments that must be made. However, an existing mortgage on the home may reduce the amount of income that one can receive from a reverse mortgage, because the reverse mortgage must be in a first lien position. Most types of homes will qualify, including single family homes, manufactured homes built after 1976, condos and townhomes. Cooperative housing typically does not qualify, particularly in government programs (e.g. HUD / HECMs) . However, some private lenders have programs that allow reverse mortgages for cooperative housing (co-ops) in New York.

Reverse Mortgage Loan Limits

Loan limits are based on several factors, including borrower age, the appraised value of the home, market interest rates and, for reverse mortgages obtained under certain government programs, program limits that vary by geography.

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Reverse Mortgage Lending Programs

Many banks and lenders offer private reverse mortgage products, and there are presently two national lending programs. Private lending programs may allow homeowners with homes valued at greater than $550,000 to obtain higher proceeds from their reverse mortgage.

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Questions About Reverse Mortgages

Many other questions about reverse mortgages are answered on our Frequently Asked Questions (FAQ) page. The National Reverse Mortgage Lenders Association also offers a free guide to senior reverse mortgages through its website, www.reversemortgage.org.

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