Back to Previous

What makes a good reverse mortgage candidate?

Published
3 Min. Read

Reverse mortgage loans are a great tool borrowers can use to tap into a portion of their home equity to help with cash flow and retirement goals.  Home equity conversion mortgages (HECMs) are the most common reverse mortgage loans. But, like any financial product, they aren’t for everyone. Here’s a list of the qualifications that make a good reverse mortgage candidate. 

Meet the age requirement 

To be eligible for a HECM, borrowers must be at least 62. There is more flexibility with the age requirement for a proprietary reverse mortgage loan since these are not government-insured and are serviced by private lenders. Age requirements for proprietary reverse mortgages vary but can be as young as 55.  

Have adequate cash flow 

As part of the terms of their loan, reverse mortgage borrowers must maintain their homes and pay home association dues, property taxes, and insurance. Keeping up with these ongoing eligibility requirements may be difficult without adequate and stable cash flow from other sources like retirement savings and investments. 

You plan to stay in your primary residence long-term 

To be eligible for a HECM and a good reverse mortgage candidate, the mortgaged home must be your primary residence and you must reside there most of the year. If you foresee an issue and you think you’ll need to move within a few months, a reverse mortgage may not be a good choice. For instance, a temporary stay in a facility will not impact the loan, but any stay over 12 months may render the loan due and payable.  

Reverse mortgage loans are a great tool borrowers can use to tap into a portion of their home equity to help with cash flow and retirement goals. Currently, home equity conversion mortgages (HECMs) are the most common reverse mortgage loans. But, like any financial product, they aren’t for everyone. Here’s a list of the qualifications that make a good reverse mortgage candidate. 

Gaps in your retirement plan  

Planning for retirement means ensuring you have allotted enough funds for future expenses. Many people’s retirement plan is fine as long as they don’t run into any unexpected expenses. A reverse mortgage line of credit can offer a stopgap for potentially large and unplanned expenses like emergency or long-term medical costs, higher cost of living due to inflation or simply living longer than you expected.  

Desire to age in place 

If you want to stay in your home as you age, funds from a HECM and the removal of required monthly mortgage payments can be instrumental in helping you afford it. Reverse mortgage proceeds can help you pay for necessary modifications to your home. Because you can take proceeds in multiple ways, choosing a line of credit may give you the flexibility to access funds as your needs change.  

What Do You Pay with a Reverse Mortgage?

Reverse mortgage borrowers stay in their home without making any required monthly mortgage payments. However, in order to enjoy those privileges, they must stay in the good standing with their loan. Homeowners who don’t meet their loan obligations will need to repay the loan. Obligations include:

  • Paying property taxes, homeowner’s insurance, and other home-related fees
  • Living in the home as their principal residence
  • Maintaining the home

Be sure you understand the loan terms

Even if you think you’ve checked all the boxes and a reverse mortgage is right for you, it is important that you fully understand the terms of the loan and its impact on your financial situation. Working with a professional financial advisor to get a clear picture of how this loan could work with your retirement plan is a great first step. 

Related articles

People learning about home equity conversion mortgages (HECM)
What is a Home Equity Conversion Mortgage (HECM)?

A HECM is a reverse mortgage, but not all reverse mortgages are HECMs. Learn how they are different.

Read article from What is a Home Equity Conversion Mortgage (HECM)?
Happy couple signing their reverse mortgage loan
When is a reverse mortgage a good idea?

In the right situation, a reverse mortgage can be a powerful tool. Find out if one makes sense for you.

Read article from When is a reverse mortgage a good idea?
Two people who know the truth about reverse mortgages
The truth about reverse mortgage

Everyone has an opinion. Separate the facts from the fiction and learn the truth about reverse mortgages.

Read article from The truth about reverse mortgage