What are the reverse mortgage rules or requirements?

The basic requirements for reverse mortgage eligibility are as follows:

  • Be 62 years of age or older
  • Own the property outright or paid-down a considerable amount
  • Occupy the property as your principal residence
  • Not be delinquent on any federal debt
  • Have financial resources to continue to make timely payment of property taxes, hazard insurance, Homeowner Association fees, etc.
  • Participate in a consumer information session given by a HUD-approved HECM counselor
  • Homeowner’s have a three-day right of rescission if they change their mind about the loan.

Reverse Mortgage Age Requirement

If one spouse is under age 62, a reverse mortgage can still be completed subject to certain non-borrowing spouse requirements. The Non-Borrowing Spouse must: 1) Have been the spouse of a HECM mortgagor at the time of loan closing and have remained the spouse of such HECM mortgagor for the duration of the HECM mortgager’s lifetime; 2) Have been properly disclosed to the mortgagee at origination and specifically named as a Non-Borrowing Spouse in the HECM documents; and 3) Have occupied, and continue to occupy, the property securing the HECM as the Principal Residence of the Non-Borrowing Spouse.

Debt Requirement for Reverse Mortgage

The reverse mortgage requirements include a provision that all liens and debts on the property must be paid off. If there is an existing mortgage on the property, it would be paid in full upon closing of the reverse mortgage. An advisor can help you make the calculations.

The reverse mortgage rules carry no penalty for prepayment of the loan. You can choose to repay the HECM reverse mortgage at any time without incurring any additional costs. If you decide to sell your home, you will receive all the remaining proceeds after repayment of your reverse mortgage.

Reverse Mortgage Counseling Requirement

All reverse mortgage applicants are required by the U.S. Department of Housing and Urban Development (HUD) to have third party counseling to review the various programs. Counseling is meant to ensure that you feel completely comfortable with the process and understand all your options.

Homeowner’s Right of Rescission

By law, you have three calendar days to change your mind and cancel the loan.  This is called a three day right of rescission.  The process of canceling the loan should be explained at loan closing.  Be sure to ask the lender for instructions on this process, as mortgage lenders differ in the process of canceling a loan.  In most cases, the right of rescission is not applicable to HECM for purchase transactions.