Reverse Mortgage Loan Blog

Question: I understand the age 62 requirement necessary to qualify for a reverse mortgage, but do both homeowners have to be 62? I’m two months shy of 65 but my wife is 60. For what it’s worth, my 90-year old Mom has been using a reverse mortgage for several years to supplement her Social Security, which is her only other income, and she’s quite happy to have the freedom to treat herself to things she could not otherwise enjoy. Manny Cervantes, Diamond Bar, Calif.

Answer: Glad to hear of your mother’s success with her reverse mortgage. I believe these backwards loans — the lender pays you based on the value of your property and your age — will improve the living standards of many seniors who are house rich but cash poor.

As for your question, all owners on the title have to be 62 years old to qualify. However, according to Peter Bell of the National Reverse Mortgage Lenders Association, sometimes a couple will remove an “under-age” spouse from title. “This is also done in some cases where there is an age disparity between a couple and they want to get the larger amount of funds available to the older one,” Bell reports.

One caveat, though: When the older owner who is left on the title passes away or permanently moves out of the home, the loan becomes due and payable.

Question: I have to laugh at the fact that reverse mortgages are non-recourse loans is being peddled as a benefit. This is nothing but an empty sell slogan by the banks. My home is currently appraised at $800,000, yet the quotes I received from three banks are that the maximum reverse mortgage that I can have is $192,000. Does anyone really expect the real estate market to crash down to 24% of its current value? Amnon Levy

Answer: It’s hard to respond to your question with the limited facts and circumstances provided. I would need to know your age and where the home is located to provide a complete answer.

But my best guess is that the $192,000 is probably the “net principal limit” available to you on a Federal Housing Administration-insured home equity conversion reverse mortgage, or HECM. The net principal limit is a percentage of the lesser of the borrower’s home value or FHA maximum loan amount for the area, based on the borrower’s age. If the value is greater than the FHA area limit, the area limit could be squeezing down the amount available to the 24% level.

If I am correct, you might get more money from a proprietary “jumbo” reverse mortgage from one of the companies that offer it as opposed to a government-insured loan which has federally-imposed lending limits.

Found here.

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