What is the reverse mortgage age limit, as in maximum age?
Older homeowners will be happy to hear that there is no upper reverse mortgage age limit.
That means you (or your loved one) can be 85, 95, or even 100 and still qualify for reverse mortgage financing.
In fact, it’s against the law for a lender to deny a loan solely based on age – for a reverse mortgage or a standard home loan or refinance.
However, the homeowner must meet some guidelines, and the loan has to make financial sense for them. Here’s how know whether an older senior should apply for a reverse mortgage.See if a reverse mortgage is right for you or your loved one.
Benefits of getting a reverse mortgage when you’re older
Reverse mortgages can bring many benefits to older homeowners. These loans, also known as Home Equity Conversion Mortgages or HECMs, can benefit the homeowner in the following ways.
Eliminate monthly payments: These loans can potentially pay off any existing mortgages, liens, or debts on the property, assuming enough equity in the home. That could free up monthly cash flow. It could also relieve mental stress of monthly payments and multiple mortgages.
Boost monthly income: The older you are, the higher your potential reverse mortgage payout becomes. According to a reverse mortgage calculator, a 90-year-old with a $750,000 home and a $100,000 existing mortgage payoff could receive over $3,800 per month for life. This could go a long way toward paying medical and other costs. Or, the homeowner can access a line of credit or one lump sum upfront payment.
Age in place: Older seniors may access a reverse mortgage to stay in a cherished home for life, even as maintenance, taxes, and insurance costs grow. Use reverse mortgage fund for in-home or visiting care. This could be an affordable alternative to assisted living.
Risks of reverse mortgages when you’re older
No loan is without risk, so older reverse mortgage applicants should know the drawbacks of getting this type of financing when advanced in years.
High costs if only needed a few years: Reverse mortgages come with higher costs than standard loans. There’s upwards of $6,000 in origination fees. In addition, an FHA mortgage insurance premium of 2% of the loan amount – $10,000 on a $500,000 loan – will be wrapped into the loan. There are also third party costs like appraisal and title. Imagine spending $20,000 or more to open a reverse mortgage, then the homeowner passes away one year later. This is a lot of home equity that will not be passed on to heirs for such a short use.
Heirs need to satisfy the debt after the homeowner’s death: Any loan will have to be addressed after death of the homeowner, but reverse mortgages are a bit different. They become due and payable upon the homeowner’s death. Heirs must decide shortly after the homeowner passes away to sell the home, refinance to pay off the debt, or forfeit the home to satisfy the debt. Heirs may have a longer timeline to decide what to do with the home if it’s a traditional mortgage.
Higher chances of needing assisted living: Reverse mortgage rules state that the borrower must live in the home, or the loan becomes due and payable. Older seniors are at a higher risk of needing assisted living. After 12 months in assisted living, the home must be sold or refinanced to pay off the reverse mortgage.
Risks for the non-borrowing spouse: A spouse who is not on the reverse mortgage may stay in the home after the borrower passes away under most circumstances. However, certain conditions could force the spouse to vacate. Be careful if the oldest borrower is advanced in years and there is a spouse who will not be on the loan.Check your eligibility for a reverse mortgage.
Reverse mortgage requirements to pay attention to when you’re older
Although reverse mortgages don’t come with payments, there are still certain requirements. Here are the ones you might pay more attention to as an applicant in your 80s or 90s.
Financial assessment: The borrower must have the financial capacity to keep up with property taxes, homeowner’s insurance, home maintenance, and HOA dues. It might be a challenge to qualify with a small fixed income. However, it’s much easier to qualify for a reverse mortgage than a cash-out refinance or home equity loan.
Occupancy: As mentioned, the borrower must live in the home as their primary residence. If the homeowner must move out to live with a relative or a health facility, the loan becomes due and payable.
Equity in the home: Older applicants will qualify for more funds upfront or monthly with a reverse mortgage because their life expectancy is lower. That means that even older seniors with a substantial mortgage on their home currently could qualify for a no-payment reverse mortgage or even get access to extra cash at closing.
How does reverse mortgage work when you die?
An unfortunate topic that any reverse mortgage applicant must think about is what happens to the house when they pass away.
According to the Consumer Finance Protection Bureau, heirs will receive a due and payable notice upon the borrower’s death. They have 30 days to let the loan servicer know how they wish to proceed.
Heirs can sell the home, pay off the loan with personal assets, or allow the lender to foreclose on the home.
It’s a common misconception that the heirs will have to pay for any unpaid reverse mortgage balance if the loan has grown larger than the property’s value. However, these are non-recourse loans, meaning HUD and the lender take that risk.
If the home is forfeited or sold for at least 95% of the current value, heirs are not responsible for any shortfall, that is, if a HUD-sponsored reverse mortgage was opened. There are also proprietary reverse mortgages that may have different rules.
In most cases, a spouse whose name was on the reverse mortgage, or an eligible non-borrowing spouse, may stay in the home until their death or leaving the home.
The minimum age for a HUD-sponsored FHA reverse mortgages is 62. Some proprietary non-government reverse mortgages allow applicants to be as young as 55.
Yes. There is no maximum age limit for a reverse mortgage. In fact, you may be eligible for a higher maximum loan balance if you are older, due to decreased life expectancy.
Yes. As mentioned, there is no upper age limit for a reverse mortgage. Someone who is in their 90s can be approved for a HUD-sponsored reverse mortgage.
A reverse mortgage is a useful tool for an aging generation of homeowners. However, as with any financial product, bad actors emerge to take advantage of consumers. It’s wise to get as many people involved in the decisions as possible, from financial planners to adult children, to avoid scams and ensure the best decision.
Is a reverse mortgage right for you?
The reverse mortgage is a powerful resource for older seniors who want to stay in their homes despite rising costs and fixed incomes.
And, with no maximum age, the program can serve even the oldest homeowners.See if a reverse mortgage is right for you or your loved one.