Reverse Mortgage Requirements
If you’ve heard about a reverse mortgage and its associated benefits, you may want to find out if you qualify to access the loan.
Thankfully, the requirements are not too difficult to meet, and many American seniors have continued to opt for the mortgage option, instead of letting their money just sit idly in their home equity.
If you are considering a reverse mortgage, it is instructive to know that you won’t pay any tax on the money you receive from your home equity. Plus, you are not required to make monthly mortgage payments.
You May Still Qualify, Even if You Have an Existing Mortgage
If you have an existing mortgage (many people do), it does not necessarily mean you can’t be eligible for a reverse mortgage. One of the major reasons many seniors take out a reverse mortgage loan is to pay off any existing mortgages.
Paying off your existing mortgages frees you from the trouble of making monthly mortgage payments. After clearing your mortgage, the remaining proceeds from the loan will be yours to use for whatever purpose you want.
The more equity that is left in your property, the more cash you will be able to receive from a reverse mortgage. That means you will be left with a substantial amount to supplement your retirement income after paying off any existing mortgages.
Even if you meet the above requirements, a lender or bank will go through your credit history before issuing a reverse mortgage. Checking your credit history enables the lender to substantiate your monthly income against all your monthly financial commitments.
If everything checks out, the appraisal process can commence, to determine the exact loan amount you qualify to receive.
You can receive more funds if you wait until you are older. In fact, the recommendation by the Consumer Financial Protection Bureau is for seniors to hold off taking out a reverse mortgage loan until they are older. This will minimize the risk of burning through their funds too early into retirement and running out of cash to maintain the home and pay property fees.
In the event that you qualify and have received funds from the equity on your home, you still have a responsibility to stay within the loan terms.
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