A reverse mortgage is a loan from the U.S. Government for 50% to 75% of the value of a home owned by a homeowner aged 62 and older. Instead of making monthly payments to a lender, as with a regular mortgage, a lender makes payments to the homeowner. The funds from a reverse mortgage are tax-free. The loan doesn't have to be repaid in the homeowner's lifetime, however, when the homeowner dies, the money received plus approximately 4% interest is repaid by their estate. The loan is repaid when the homeowner ceases to occupy the home as a principal residence, due to the homeowner (the last remaining spouse, in cases of couples) passing away, selling the home, or permanently moving out.
Virgin Islands Home Equity Conversion Mortgage - Reverse Mortgage
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Lenders can deny applications when they determine through a financial assessment that the homeowner can't afford the property's upkeep, taxes, and homeowner's insurance costs. In addition, to be approved, you must be current on any federal debt or be able to pay it in full at closing with proceeds from the loan.
You've failed the lender's financial assessment If the lender determines that you have insufficient income to afford the ongoing costs, or you have defaulted on debts before, your reverse mortgage application could be denied.
Since your property must be considered your primary residence, vacation homes and secondary homes do not qualify for the reverse mortgage loan. In addition, homes on income-producing land, such as a farm, are not eligible. A reverse mortgage loan must be the primary lien on your home to qualify.
A Home Equity Conversion Mortgage (HECM), the most common type of reverse mortgage, is a special type of home loan only for homeowners who are 62 and older. This information only applies to Home Equity Conversion Mortgages (HECMs), which are the most common type of reverse mortgage loans.
Who is not a good candidate for a reverse mortgage? A reverse mortgage is a questionable proposition if you have sufficient income to pay your bills or are willing to sell your home to tap into the equity. If that's the case, it may make more sense to just sell it and downsize your home.
Aside from age, other reverse mortgage requirements include: Your home must be your principal residence, meaning you live there the majority of the year. You must either own your home outright or have a low mortgage balance. ... You cannot owe any federal debt, such as federal income taxes or federal student loans.
Is it hard to get approved for a reverse mortgage? Getting approved for a reverse mortgage typically hinges on your equity stake in the home, age, and financial resources. You may not be approved if you have limited resources or if your home doesn't meet eligibility requirements.
Taking a loan too early The earliest a homeowner is eligible to take out a reverse mortgage is age 62, but Orman considers it risky to do so. "If you tap all your home equity through a reverse at 62 and then at 72 you realize you can't really afford the home, you will have to sell the home," she said.
