Reverse Mortgage Daily - HousingWire (2024)

FAQs

What does Suze Orman say about reverse mortgages? ›

Taking a loan too early

The earliest a homeowner is eligible to take out a reverse mortgage is age 62, but Orman considers it risky to do so. "If you tap all your home equity through a reverse at 62 and then at 72 you realize you can't really afford the home, you will have to sell the home," she said.

Smaller Inheritances and Greater Hassles for Any Heirs

A reverse mortgage can also deplete much of the homeowner's wealth, especially if their home is basically all they have, leaving little behind for their heirs.

You may also be disqualified if your home is in disrepair, you have delinquent federal debts, or you have not completed a HUD-approved counseling session.

While a reverse mortgage lets you access your equity without selling your house right away, it can be financially risky: A reverse mortgage increases your debt and can use up your equity. While the amount is based on your equity, you're still borrowing the money and paying the lender a fee and interest.

You can better manage expenses in retirement

Many seniors experience a significant income reduction when they retire. A reverse mortgage allows you to supplement that diminished income without digging into savings. You don't have to make monthly payments, either, which could help free up room in your monthly budget.

Just like a traditional mortgage, with a HECM you are borrowing money and using your home as security for the loan. You must continue to pay for property taxes, homeowner's insurance, and make repairs needed to maintain your home or the lender can foreclose on the home.

In the early days of reverse mortgages, determining financial fitness was left to the borrower. Some borrowers who didn't fully understand their loan requirements, miscalculated their financial stability, or found themselves unexpectedly short on cash also found themselves in danger of losing their homes.

If the end of your term is up before you pass away, then you have outlived your reverse mortgage proceeds. With a term payment plan, you reach your loan's principal limit—the maximum that you can borrow—at the end of the term. After that, you won't be able to receive additional proceeds from your reverse mortgage.

AARP does not recommend for or against reverse mortgages. They do, however, recommend that borrowers take the time to become educated so that borrowers are doing what is suitable for their circ*mstances.

What is the current interest rate on reverse mortgages? ›

A counselor can help you decide whether a reverse mortgage or some alternative is the best choice for you. To find a HUD-approved Home Equity Conversion Mortgage (HECM) counselor near you, call (800) 569-4287.

Lenders can deny applications when they determine through a financial assessment that the homeowner can't afford the property's upkeep, taxes, and homeowner's insurance costs. In addition, to be approved, you must be current on any federal debt or be able to pay it in full at closing with proceeds from the loan.

There are no credit score or income requirements for reverse mortgages. HUD requires all reverse mortgage borrowers to complete a counseling session.

One standard rule of thumb is that you need 50% equity in your home to qualify for a reverse mortgage. The U.S. Department of Housing and Urban Development (HUD) offers general guidance for equity requirements.

Just like a traditional mortgage, with a HECM you are borrowing money and using your home as security for the loan. You must continue to pay for property taxes, homeowner's insurance, and make repairs needed to maintain your home or the lender can foreclose on the home.

You generally aren't eligible for a reverse mortgage until you reach age 62, and the older you are after that, the more you're often able to borrow.

If borrowers run out of available funds, they can stay in the house, provided they continue to live in and maintain it and stay current on required taxes and insurance. In this sense, they will not have outlived the mortgage, but they will have outlived their ability to borrow more money from it.