What is a Reverse Mortgage?

A reverse mortgage is a type of loan where the California homeowner withdraws a portion of their equity but doesn’t have to repay the loan until they leave the house.

With a reverse mortgage, the lender makes payments to the homeowner. The homeowner gets to choose how to receive these payments and only pays interest on the proceeds received. The interest is rolled into the loan balance so the homeowner doesn’t pay anything up front. The homeowner also keeps the title to the home.

How to Qualify for a Reverse Mortgage

The primary homeowner must be age 62 or older to apply. However, if you are under 62, you may still be able to get a reverse mortgage if you meet other eligibility criteria. For example:

You must own your California home outright or have a single primary lien you hope to borrow against.

Any existing mortgage you have must be paid off using the proceeds from your reverse mortgage.

You must live in the home as your primary residence.

You must remain current on property taxes, homeowner’s insurance and other mandatory obligations, such as homeowners association dues.

You must participate in a consumer information session led by a HUD-approved counselor.

You must maintain your California property and keep it in good working condition.

Your home must be a single-family home, a multi-unit property with up to four units, a manufactured home built after June 1976, a condominium, or a townhouse.

Types of Reverse Mortgages

Proprietary reverse mortgages – these are private loans not backed by any government entity. Typically you can receive a larger loan advance from this type of reverse mortgage, especially those who have higher-valued homes.

Single-purpose mortgages – not as common as the other two options, this type of reverse mortgage is usually offered by non-profit organizations and a few state and local government agencies. California Borrowers can only use the loan for one specific purpose.
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Home Equity Conversion Mortgages (HCEMs) – the most popular type of reverse mortgage and backed by the U. S. Department of Housing and Urban Development (HUD), these federally insured mortgages usually have higher upfront costs, but the funds can be used for any purpose. Before closing on a HECM, all borrowers will need to go through counseling from a HUD-approved counselor. The point is to help you understand how a reverse mortgage works from someone who won’t benefit from you taking out the loan.