You can get a reverse mortgage if you own a condominium, as long as it is your principal residence. Reverse mortgages are not limited to single-family detached homes.
Read on to learn more about how an FHA Home Equity Conversion Mortgage, the most common type of reverse mortgage, works. But once you learn more about these loans, including their downsides, you might want to reconsider getting one.
The U.S. government insures Home Equity Conversion Mortgage (HECMs) through the Federal Housing Administration (FHA). This insurance protects the lender, not the borrower, and comes into play if the loan is accelerated (called due) and the house isn't worth enough to pay back the lender in full through a foreclosure sale or other type of liquidation process. In those cases, the FHA will compensate the lender for the loss.
HECMs are generally available to borrowers who are at least 62 years of age, occupy the property as a principal residence, and own the home outright or have significant equity in the home. (To learn more about HECMs, see Reverse Mortgages: Restrictions and Requirements.)
The following types of properties are eligible for a HECM:
Reverse mortgages have significant downsides:
If you're considering a reverse mortgage, it's highly recommend that you proceed cautiously and make sure you understand all of the risks and conditions involved with such a loan. For more information on reverse mortgages and the risks related thereto, visit AARP’s reverse mortgage webpage. You can also go to the Federal Trade Commission’s website on reverse mortgages or the Consumer Financial Protection Bureau’s website to get more information.
An attorney can also help you go over the pros and cons of getting a reverse mortgage. Even though you'll have to complete a counseling session with an HUD-approved counselor if you want to get a HECM, it's also highly recommended that you consider talking to a financial planner, an estate planning attorney, or a consumer protection lawyer before taking out this kind of loan.