Cautions

As with any financial transaction--be it a mortgage, a credit card or even a bank account--there are specific rules and obligations attached to reverse mortgages. Some of them are unique to this particular financial product. You may be accustomed to such items being buried in fine print. With reverse mortgages, both loan officers and counselors will explain these specifics to you as part of the loan process.

Among the rules and obligations you need to be aware of are:

  • Everyone listed on the deed of a home owned by someone seeking a reverse mortgage must be over 62 years old;
  • If your husband or wife, for instance, is under 62, their name cannot be on the title if you want to qualify for a reverse mortgage. Names can be added or removed from titles;
  • If a name is removed from a title, that person is no longer an owner of the home. When the person whose name is on the deed passes, the surviving spouse or the heirs are responsible for paying back the reverse mortgage loan. The loan can be repaid out of other resources or by selling the home. If there is a balance from the sale of the home after the reverse mortgage is paid, it belongs to the heirs;
  • A reverse mortgage must be the only lien on a property. This means, in order to obtain a reverse mortgage you must pay off any existing traditional mortgage. You can use your reverse mortgage proceeds to pay off your traditional mortgage;
  • A reverse mortgage holder is responsible for staying current on their real estate taxes and homeowner’s insurance. If you go into arrears, you take the risk of being forced into default;
  • A reverse mortgage holder is responsible for maintenance of the home;
  • The home must be your primary residence, which means you must live there more than 183 days a year;
  • You are only permitted to live out of your home for a total of twelve months. This means, if you find yourself in, say, an extended care situation, or on an extended out-of-town work situation, you must approach your lender and discuss;
  • Loan originators are not permitted to require that you purchase other financial products (i.e., annuities, long term care insurance) as a condition for getting a reverse mortgage. If they do, you should report this to HUD or NRMLA.