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 reverse mortgages (including the FHA’s Home Equity Conversion Mortgage, as well as proprietary reverse mortgages) work.
Reverse mortgages are designed to allow older homeowners to convert the equity in their homes into cash to supplement their income. Rather, the loan proceeds are paid out to the borrower as a monthly payment, line of credit, or a lump sum. You can also get a combination of monthly installments and a line of credit. The amount available under the loan is based on how much equity the borrower has in the home.
The reverse mortgage loan typically becomes due when you:
The Home Equity Conversion Mortgage (HECM) is the Federal Housing Administration (FHA) reverse mortgage program. The U.S. government insures HECMs through the FHA. HECMs are the most common type of reverse mortgages, accounting for approximately 90% of the total market.
HECMs are generally available to borrowers who:
You can qualify for a HECM if your home is:
Reverse mortgages that are not insured by the FHA are known as proprietary reverse mortgages. Private banks and mortgage lenders offer these proprietary reverse mortgages, though few exist in the marketplace today. Those that do exist are typically available only to those with high-value homes. (Proprietary reverse mortgages are sometimes called “jumbo reverse mortgages.”)
Proprietary reverse mortgages come in a variety of different forms, but most are nonrecourse loans (which means the lender cannot get a deficiency judgment) where borrowers qualify for the loan based on:
Because the government does not insure proprietary reverse mortgages, lenders tend to be conservative in underwriting them. And, the requirements to qualify for a proprietary reverse mortgage may be different than for a HECM. To qualify for some proprietary reverse mortgages, for example, you only need to be 60 years old.
Proprietary reverse mortgages are often available to condominium owners.
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.
To learn more about HECMs (reverse mortgages insured by the U.S. Government through the Federal Housing Administration), go to www.hud.gov and enter "Home Equity Conversion Mortgage" in the search box to find a list of relevant links.
An attorney can also help you go over the pros and cons of getting a reverse mortgage. If you already have a reverse mortgage and you're facing a foreclosure, consider contacting an attorney immediately to talk about your options.