Can you get a reverse mortgage on leased land?

Question

We own a home in an over-55 community, but we do not own the land it sits on. Instead, we have a five-year renewable lease. Up until two years ago—just before we moved in—the community offered 99-year leases, but they no longer do.We have over $400,000 in equity in our home and were wondering if we qualify for a reverse mortgage. I am fully retired, and my husband will retire in May.Please help! Thanks.

Michael G. Branson · Accepted Answer

Hello Rachelle, Unfortunately, your current five-year lease terms do not meet HUD’s requirements for a reverse mortgage. HUD’s Lease Requirements for Reverse Mortgages For properties on leased land, HUD requires that the lease extend at least 50 years beyond the youngest borrower’s 100th birthday. This requirement is based on the remaining term at the time of loan origination, not the original lease term. For example:  A 99-year lease with 99 years remaining would be acceptable for all borrowers over 62 years old.   However, if a 99-year lease had only 50 years remaining, a 62-year-old borrower would only have coverage until age 112, making it ineligible under HUD’s guidelines.   Five-year lease increments are not acceptable.  Possible Exceptions There are a few rare exceptions, but they are difficult to qualify for:  Guaranteed Lease Extensions – If your five-year lease includes automatic renewals that extend at least 50 years past the youngest borrower’s 100th birthday and the renewal terms are reasonable (i.e., no excessive increases in rent), it may be considered.   Leases on Tribal or Indian Land – In this case, lease extensions must have Tribal Council approval, which is rarely obtainable in practice.  If your lease does not meet these conditions, you will not qualify for a reverse mortgage. Source: HUD Reverse Mortgage Rules for Leased LandA reverse mortgage, or Home Equity Conversion Mortgage (HECM), secured by real estate on a Leasehold that is under a renewable lease for not less than 99 years, or a lease with the actuarial life expectancy of the Mortgagor. SubLeasehold Estates are not eligible for FHA mortgage insurance.

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