Borrower Qualifications
Finding Out If You Qualify for Remortgage
Almost anyone who meets the basic requirements can get a reverse mortgage. You don’t need perfect credit, you don’t need a down payment, and you don’t need a steady job. In fact, none of those points matter in a reverse mortgage.
Aging gracefully
Though you may feel discriminated against because of your age in some facets of life, reverse mortgages were designed especially for you. In order to receive a reverse mortgage you must be at least 62 years old. No exceptions.
But wait, it gets even better. The older you are, the better you’ll do on a reverse mortgage. Why? Because lenders know that the younger you are, the longer they’ll have to pay you. Lenders use actuarial charts (just like insurance companies) to guess how long you’ll be in your home. The charts aren’t a crystal ball, and they’re not always right, but they give a pretty good estimation. Then lenders calculate your loan based on your age, your home’s value, and whatever the current interest rates are.
Look at Table 3-1 for an example of how your age can work for you in a reverse mortgage. Let’s say our borrower, Nathaniel, owns a home worth $235,000 in Jenkintown, PA, and owes no outstanding mortgage debt. He’s choosing a Home Equity Conversion Mortgage (HECM) reverse mortgage product and wants a lump sum, giving him all his money in one big check. We’ll pretend for our purposes that interest rates don’t change into the future (although in real life, Nathaniel’s initial loan amount would be affected by rising and falling rates). The table shows how much Nathaniel could expect to borrow if he closed the loan at particular ages. Notice that the older our fictitious borrower gets, the more money the lenders are willing to loan him.
How Age Affects Your Loan
Age at time of Total loan amount loan closing available
Almost anyone who meets the basic requirements can get a reverse mortgage. You don’t need perfect credit, you don’t need a down payment, and you don’t need a steady job. In fact, none of those points matter in a reverse mortgage.
Aging gracefully
Though you may feel discriminated against because of your age in some facets of life, reverse mortgages were designed especially for you. In order to receive a reverse mortgage you must be at least 62 years old. No exceptions.
But wait, it gets even better. The older you are, the better you’ll do on a reverse mortgage. Why? Because lenders know that the younger you are, the longer they’ll have to pay you. Lenders use actuarial charts (just like insurance companies) to guess how long you’ll be in your home. The charts aren’t a crystal ball, and they’re not always right, but they give a pretty good estimation. Then lenders calculate your loan based on your age, your home’s value, and whatever the current interest rates are.
Look at Table 3-1 for an example of how your age can work for you in a reverse mortgage. Let’s say our borrower, Nathaniel, owns a home worth $235,000 in Jenkintown, PA, and owes no outstanding mortgage debt. He’s choosing a Home Equity Conversion Mortgage (HECM) reverse mortgage product and wants a lump sum, giving him all his money in one big check. We’ll pretend for our purposes that interest rates don’t change into the future (although in real life, Nathaniel’s initial loan amount would be affected by rising and falling rates). The table shows how much Nathaniel could expect to borrow if he closed the loan at particular ages. Notice that the older our fictitious borrower gets, the more money the lenders are willing to loan him.
How Age Affects Your Loan
Age at time of Total loan amount loan closing available
- 62 $116,754
- 67 $126,806
- 72 $137,401
- 77 $148,796
- 82 $160,349
- 87 $171,433
- 92 $182,354
The typical age for reverse mortgage estimates is 75, because by then you’re old enough to get a pretty hefty check but young enough to be able to enjoy your new income. When you see examples of reverse mortgage calculations (in this book and in the world at large) you’ll probably notice that the hypothetical borrower is 75. It’s not a magic number, and by no means should it be seen as any sort of limitation, but as far as the lenders go it’s the perfect win-win age.
There’s a disadvantage to this age system, however. If a couple, ages 62 and 75, want to get a loan, you may think they should be able to get a pretty good-sized check since 75 is just about the ideal reverse mortgage age. But that’s not the case. For most reverse mortgage loans, the age used to calculate the loan is that of the youngest borrower (sneaky, isn’t it?). If Nathaniel (age 75) and his youngest brother (age 62) want to live together to save some money, their reverse mortgage will be calculated using his brother’s age, which means a lower loan amount. On the other hand, Nathaniel and his brother may find that they can get a larger sum with a Fannie Mae Home Keeper loan (see Chapter 6) because Fannie Mae uses a combination of borrower ages to determine the available funds.
No matter what your age, if you are interested in getting a reverse mortgage, find out what your options are from your originator
There’s a disadvantage to this age system, however. If a couple, ages 62 and 75, want to get a loan, you may think they should be able to get a pretty good-sized check since 75 is just about the ideal reverse mortgage age. But that’s not the case. For most reverse mortgage loans, the age used to calculate the loan is that of the youngest borrower (sneaky, isn’t it?). If Nathaniel (age 75) and his youngest brother (age 62) want to live together to save some money, their reverse mortgage will be calculated using his brother’s age, which means a lower loan amount. On the other hand, Nathaniel and his brother may find that they can get a larger sum with a Fannie Mae Home Keeper loan (see Chapter 6) because Fannie Mae uses a combination of borrower ages to determine the available funds.
No matter what your age, if you are interested in getting a reverse mortgage, find out what your options are from your originator
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