If you meet the reverse mortgage age requirement of 62 years, you could be a candidate for the federally-insured Home Equity Conversion Mortgage (HECM) program. The loan can enable you to remain in your home longer and does not need to be repaid for as long as you maintain principal residency in your home and keep up with property taxes and insurance.
Because the length of the loan depends directly on how long you live in the home, the amount you can borrow also depends on that time frame, including the age at which you get the reverse mortgage. Reverse mortgage proceeds can be accessed in a few different ways—as a line of credit, as monthly term or tenure payments, as a lump sum, or some combination of those options—and can be used in whatever way you’d like; for groceries, medication, or even utility bills.
Borrowers must pay an upfront mortgage insurance premium along with annual mortgage insurance of 0.5% of the outstanding loan balance annually.
Proprietary Programs Work at Age 55
Borrowers who are not yet 62 but are 55 and over can also choose to seek a reverse mortgage from one of the “Jumbo” or “Proprietary Programs” available. The private programs are not insured by HUD and therefore there is no mortgage insurance required.
The requirements and property eligibility criteria can be different but are very similar and borrowers who feel they do not want to wait for their 62nd birthday can always investigate one of the private programs to determine if it will meet their needs.
How Much Can I Receive from a Reverse Mortgage?
The amount of money you can receive from a reverse mortgage depends on a few factors:
- your age
- home value
- current interest rates and fees.
Your age plays a large role, because the older you are the more money you will qualify when you take out the reverse mortgage.
The amount of money is based on principal limit factors, which provide you with more money as you get older.
For example, if you’re a homeowner who owns your home, check out the examples below.
2022's Reverse Mortgage Principal Limit Factors
|Age of Borrower||Principal Limit Factor||Current Lending Limit|
PLF tables source: https://www.hud.gov/sites/documents/august2017plftables.xls
Which Program Should I Choose?
There are a couple of different HECM programs to choose from, including fixed rate and adjustable; lump sum distributions and monthly payments or lines of credits from which the borrower can draw as needed/desired. What is right or best is what is right or best for the borrowers’ individual circumstances.
The fixed rate loan seems attractive to many borrowers but there are several downfalls borrowers must consider.
Namely, fixed rates require a full draw of all sums available. If you do not need all the money to pay off existing liens, HUD requirements on their program only allow a portion of the line to be accessed in the first 12 months and on a fixed rate loan with no subsequent draws available, any amount not available in the initial draw is lost to the borrower.
Also, since fixed rates are often higher than the adjustable rates and since interest rates are one of the determining factors as to how much money a borrower will receive, adjustable rate borrowers most often receive higher benefits in today’s interest rate environment.
Finally, the adjustable program gives borrowers more options as to how they will receive their funds (remember, with the fixed rate the only option is a one-time full draw of all funds available).
Borrowers who choose an adjustable rate loan have several options of how to receive their loan proceeds, including a line of credit, monthly payments, or even a lump sum.
The funds still in the line of credit grow annually at the same rate as the interest accrual rate plus the MIP accrual rate on the unused portion. This is not interest you are earning but rather greater borrowing power later as the available line is increased by the growth amount.
You only owe what you borrow and you only accrue interest on the outstanding balance so just having the additional money available costs you nothing and does not need to be repaid later unless you actually draw and used those funds.
What is the minimum age for a Reverse Mortgage?
HUD has established the minimum age for a reverse mortgage borrower to be 62 years of age by the time the loan closes.
What is the minimum age for a Jumbo Reverse Mortgage?
Generally, jumbo programs also use a 62-year-old minimum age but there are also several programs now available for borrowers down to 55 years of age.
Can my spouse under the age of 62 be protected?
The HUD HECM allows for an “eligible non-borrowing spouse” under the age of 62 that, although they cannot access the reverse mortgage funds if the eligible borrower were to leave the home, they can remain in the home for life by following the same reverse mortgage provisions (live in the home as their primary residence, pay the taxes, insurance and any other property charges in a timely manner and also maintain the home in a reasonable manner).
Is there any age limitation to getting a reverse mortgage?
To get a reverse mortgage, borrowers must be at least 62 years of age for the HUD HECM program and there are programs available down to age 55 on the jumbo or private reverse mortgage programs.
Can you outlive a reverse mortgage?
You can outlive the benefits available under a reverse mortgage if you draw all available funds, but you can live in the home payment free for life as long as you continue to pay the taxes, insurance and any property charges even after your available funds are gone. The earlier you take the loan out, the longer your balance will accrue interest. While it’s not required, you do have the option of making payments—even if it’s just on the interest—on your reverse mortgage throughout the term of the loan.
If you’re considering a reverse mortgage and have questions about what kind of loan to take out, or how it may vary depending on your age, don’t hesitate to call us Toll Free 800-565-1722 and find out more.
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