I took out an equity line of credit 9 months ago, can I still get a reverse mortgage?By Catherine on 12.04.2018
HUD requires money a borrower may take on the reverse mortgage in the first 12 months of the loan. They limit borrowers to 60% of their Principal Limit unless they are paying off existing financing that has existed for more than 12 months or was used for the purchase or to pay off another loan, and the borrower took no cash out at the time. Based on that, if the amount needed to pay off all loans on the house, including your equity line, equals 60% of your available Principal Limit or less, then yes, you can take out a reverse mortgage now.
If your equity line was used to pay off an existing line and you took cash from the line for your pocket, then again, yes, you can take out a reverse mortgage now, even if you need more than 60% of your available Principal Limit. If you opened the equity line but did not use it or have funds to pay it off and do not need to use the reverse mortgage to pay that line off, then yes, you can still get the loan.
The equity line was not used solely to pay off an existing loan on the house; you must wait another three months before applying for the reverse mortgage, as that loan would have to have 12 months of seasoning. However, if you are over the 60% threshold established by HUD, you need the reverse mortgage funds to pay the line off. It gets complicated under the new program guidelines issued under HUD’s Final Rule, so I would encourage you to let us review your circumstances and let you know for sure how you would be considered.
You can see how much money you can expect from the program, which will also give you a chance to review your options. If you would like, we would be happy to also discuss the seasoning requirements with you based on your circumstances.