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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 were 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 the lease extend 50 years beyond the youngest borrower’s 100th birthday for leased land to be acceptable.  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 period still has 99 years on the lease would be fine in all instances, considering a minimum borrower age of 62.  But if 50 years remain 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).  Suppose the lease has 5-year terms with guaranteed renewals extending 50 years or more beyond the youngest borrower’s 100th birthday at acceptable terms (the terms for any payment increases are not excessive). In that case, 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. In all honesty, in our experience, that is usually not obtainable.

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

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