Reverse Mortgage Possible Only For Nearly Paid-Off Home
Added February 26, 2009 by Ilyce R. GlinkSummary: As you get older you may be trying to think of ways to supplement your income. One way to supplement income in retirement is a reverse mortgage, but that works only for homes that are nearly paid off. If you still owe money on a mortgage for your primary residence you won't be able to get a reverse mortgage.
Q: My husband is 69 and I am 64 and he would like us to do a reverse mortgage. The mortgage balance is $215,000 and the house is valued at approximately $300,000. We have a special needs son (he has Asperger's syndrome) living with us and three other independent children.
My husband is anxious to do a reverse mortgage and I am reluctant. What factors should we consider before doing a reverse mortgage to decide whether this is right for us? Thank you for your help.
A: Here's what I'm thinking: You won't qualify for a reverse mortgage. To do a reverse mortgage, you need to have virtually no mortgage balance. If your house is mortgage free, you'd only be able to borrow up to about 60 percent of the value, which is less than what you owe on the property.
For those individuals who have a home that has no mortgage or almost no mortgage on it, a reverse mortgage allows a new mortgage to be placed on the property. The homeowner could then receive a lump sum or monthly payment from the lender and use that money for living expenses. The reverse mortgage is paid back when the home is sold.
Finally, you have to be at least 62 years old to qualify for a reverse mortgage.
I have written extensively about reverse mortgages on my website. Please search there for additional information, and then if you're still interested and want to check it out, please find a qualified reverse mortgage lender. You can go onto the HUD.gov website, and find the link to a housing counselor. They will guide you from there.
Feb. 26, 2009.
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Comments
Elle says
Is it because of the economy, I didn't know your home had to be nearly paid off to get a reverse mortgage. Did the rules recently change?
Ilyce says
Elle: If your home isn't paid off or nearly paid off, you either won't get very much cash out of your reverse mortgage, or you won't qualify for one. If you have a mortgage of any size, it eats directly into the amount of cash you can get in a reverse mortgage because your equity is so much less. One thing some seniors are able to do is to trade their remaining mortgage balance for a reverse mortgage. While they don't get any cash out of the deal, at least they don't have a mortgage to pay any more. But be careful. You'll still need to pay your homeowners' insurance and property taxes. Thanks for your comment.