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We own a home in an over 55 community in Massachusetts. The issue is that we own the home but not the land it sits on and we have a five year renewable lease (up until two years ago just before we moved in they offered 99 year leases but do not do that any longer). We have over $400,000 of equity in our home and was wondering if we would qualify for a reverse mortgage? I am fully retired, and my husband will be retired as of May. Please help! Thanks.

By Rachelle B. on 01.17.2019

Hello Rachelle,

Those terms would not meet HUD’s requirements.  HUD requires that for leased land to be acceptable, the lease must extend 50 years beyond the youngest borrower’s 100th birthday.  The timeframe is determined by the remaining term of the lease at the origination of the loan, not the original term.   So, a 99-year term that still has 99 years on the lease would be fine in all instances considering a minimum borrower age of 62.  But if there was 50 years remaining on a 99-year lease for a 62-year-old borrower, that would only extend 12 years beyond the borrower’s 100th birthday and would not be acceptable.  In any case, 5-year increments are not acceptable. 

Now let’s talk about a couple of exceptions (yes, there are always exceptions it seems).  If the lease has 5-year terms that also have guaranteed renewals that extend 50 years or more beyond the youngest borrower’s 100th birthday, at acceptable terms (the terms for any payment increases are not excessive), then the lease may be considered.  And if the lease is on Indian or Tribal Land, then the lease must also have Tribal Council approval for the extensions and in all honesty, in our experience, that is usually not obtainable.

Related: https://reverse.mortgage/condo-leased-land

 

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