The minimum age for homeowners to take out a reverse mortgage loan is 62. But what about the maximum age? Is anyone ever too old for this type of home loan?
How a reverse mortgage loan works
Formally called home equity conversion mortgages, or HECMs, reverse mortgage loans allow borrowers to tap the equity in their home. No payments are required until the borrower sells the home, moves out for 12 months or longer, or dies. Then, the loan becomes due in full. The borrower remains responsible for home insurance, property taxes and maintenance.
Common motivations to get a reverse mortgage include wanting to stretch retirement income or needing money for medical treatment or in-home care.
Borrowers as old as 101
The age "sweet spot" for borrowers is probably 65 to 75 years...
But, back to the question: Are you ever too old? The short answer is no.
Different needs as you age
Younger seniors may be more likely to use a reverse mortgage loan for travel, living expenses or financial planning, while older seniors more often have health care needs, says Meehan.
While those scenarios may be common, there are no restrictions -- age-related or otherwise -- on how seniors can use reverse mortgage proceeds.
Understanding a reverse mortgage
No mental competency test or medical exam is required to get a reverse mortgage loan. However, lenders are aware that competency can diminish with age.
Loan officers should not ignore any signs of diminished capacity.
In some cases, a guardian, adult child or other trusted financial adviser given power of attorney may be involved in a senior's reverse mortgage loan.
Power of attorney must be accompanied by a physician's letter confirming that the authorization was given when the borrower was mentally competent.
Fulfilling the financial assessment
All reverse mortgage borrowers must complete a financial assessment to help ensure they'll be able to maintain their home and pay their property taxes and homeowners insurance. A borrower may be rejected on the basis of the assessment, or it may prompt a lender to set aside part of the loan proceeds to pay taxes and insurance on the borrower's behalf.
The financial assessment may be more challenging for some older seniors.
But here's something that can offset a set-aside, if it's required: Older borrowers can tap a larger percentage of their home's equity. The reason is that their life expectancy is shorter, meaning the expected term of their loan will be shorter, too.
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