Reverse Mortgage Rules

4 Important Rules To Qualify For A Reverse Mortgage In the US:

  1. You must be 62 years of age or older (a non-borrowing spouse may be under 62 years old)
  2. You must own your own home with significant equity
  3. You must live in the home as your primary residence (No Secondary Homes or Vacations homes)
  4. You must meet the simple financial requirements of the Home Equity Conversion Mortgage (HECM) program

If you qualify for a reverse mortgage there are other obligations you need to comply with since HECM Reverse Mortgages are insured and regulated the US Federal Government.

  • If you qualify for a reverse mortgage, the funds will be used immediately to pay off any existing mortgage balance if you have one
  • You will still be required to pay for your property taxes, homeowners insurance and maintain the property. Any HOA dues must also continue to be paid.
  • You will be required to comply with all the loan terms which are regulated by the HUD. For example, you will need to continue living in the home as your primary residence.

Reverse Mortgage Government Regulations:

Here are some additional regulations set by the FHA which protects borrowers and encourages responsible use of the reverse mortgage funds:

  • A new rule that came into effect on April 25th when the FHA revised the HECM age eligibility requirements to extend protections to spouses younger than 62 year old. When the older borrower dies, the younger spouse may continue to live in the home (with no loan payments) as long as they pay their property taxes, homeowners insurance, and maintain the home to a reasonable level. HOA dues must also be paid if applicable.
  • You will be required to complete an independent 3rd party counseling session with an FHA-approved counselor. This may be done over the phone or in person and ensures you have all the information you need in understanding a reverse mortgage and your options. They will also be able to help you decide if a reverse mortgage is right for you.
  • Only 60% of the reverse mortgage money may be accessed in the first year, or if you have an existing mortgage, you may access that amount plus 10%, whichever is greater. After the first year you may access as little or as much of the remaining funds as you wish.
  • Lenders are not allowed to sell other loans or financial products as a condition of the reverse mortgage loan.
  • Borrower will undergo a simple financial assessment by the lender that determines income and expense ratios. The purpose of this assessment is to ensure you are able to continue paying your property taxes, homeowners insurance, maintain the property, and any HOA dues if applicable.

You will have 3 days to cancel your reverse mortgage loan without incurring any interest. After the 3 day cool-off period, you may pay off the loan at any time should you choose to do so with no prepayment penalty.