Who qualifies for reversed mortgages?

Picture this for a moment. You just retired a few years ago and your retirement income is not sufficient to meet all your needs. You own a home which by all means makes the most of your net worth yet you are cash strapped. What do you do in this regard? Do you hope for the best or do you take into consideration the irresistible offer to turn your home into cash as advertisers of reverse mortgages like to put it? Well, before we can shed light on who qualifies for a reverse mortgage, it’s essential to have an idea of what a reverse mortgage is.

Simply put, a reverse mortgage is a unique type of loan that essentially allows older home owners to turn their home equity into cash and supplement their retirement income. In other words, with a reverse mortgage, you get the opportunity to access the home equity you have built over the years. However, unlike conventional loans, you do not pay the lender but rather the lender pays you a predetermined amount of money as reverse mortgage proceeds.
Now that we have an idea of what a reverse mortgage is, who qualifies for reverse mortgage?


In order to be considered for a reverse mortgage, it’s expected that a homeowner should be at least 62 years of age. Why is that so? Well, the government and rules set require that a person be 62 years or older in order to qualify for a reverse mortgage. What happens is that the older a person is, the more they can borrow and vice versa.

Ownership status

The other factor taken into consideration in order to qualify for a reverse mortgage has to do with the ownership status of a home. The applicant must fully own the home freely (a home with no financial attachment) or must have a small balance outstanding on their mortgage. By a “small balance”, we are essentially referring to a figure that can comfortably be cleared using the proceeds of the reverse mortgage. In addition to that, you also need to be in possession of the title to your home as well living in it as the primary residence.

In light of the above, you need to be cognizant of the fact that you cannot qualify for a reverse mortgage on a vacation home, a rental home or even on a home that initially used to be your primary residence but you no longer use it or you haven’t occupied for a period of one year.

Your home also needs to be in perfect condition in order for you to qualify for a reverse mortgage.

Your finances

Granted, your finances do not play a huge role in determining whether you qualify for a reverse mortgage or not considering the fact that you will be the one receiving payments and not making payments as is the case with traditional mortgages. That said, your finances need to be in order as you need to be able to facilitate homeowner insurance, pay property taxes as well as carry out any repairs if need arises. On this note, inability to meet the aforementioned would essentially be putting the lenders collateral (your house) at risk. For this reason, to be on the safe side and mitigate risks, lenders tend to do financial assessment to ensure that you have enough income to meet the aforementioned. In the case that you have insufficient income, they undertake to put aside some of the proceeds of a reverse mortgage with the sole objective of covering insurance and property taxes.

Counselling requirement

Granted, not all of us are financially savvy and therefore can’t fully comprehend what we are getting into. Some go for a reverse mortgage because a friend did and end up regretting later. To qualify for a reverse mortgage, the federal government requires that you undergo mortgage counselling. This is specifically aimed at ensuring that a person taking the reverse mortgage fully understands the benefits, the costs as well as the disadvantages of taking a reverse mortgage. Reverse mortgage counsellors also help a person to explore various options of making ends meet rather than resorting to getting a reverse mortgage. Needless to say, if you are financially savvy and understand what you are getting into, you might find reverse mortgage counselling a waste of time and money.

The bottom line

The reality of the matter is that not everyone can apply or qualify for a reverse mortgage loan as we have outlined above. You need to be over and above the age of 62 years to even be considered for this type of financial product. The onus should be on you fully understanding what you are getting into before taking the final plunge. It is always better to be safe than sorry.

Buying a home in a sellers’ market

Purchasing a home is always a challenging process irrespective of the real estate nature status in the market. However, during a seller’s market, the challenges house buyers face are more and it can be very difficult to get the home you want at affordable rates. A seller’s market means when there is limited supply of homes and buyers are competing for the available selections. The low housing inventory works to the advantage of the seller because of upward shift in demand that drives prices very high.

Buying a home during the seller’s market requires holistic evaluation of different factors. Experts in real estate advise that buyers strongly review whether it makes any sense to buy during the seller’s market. When you decide to buy, make sure to check the interest rates, available housing, competition and prices. The following is an account of how to go about getting the home you want during the seller’s market.

Get your financing right

Getting the finances right is very critical when buying any property. Whether you are buying during the seller’s or buyer’s market, make sure to have the mortgage pre-approved. This is critical before even starting to look for a home so that only property within your financial ability is considered. For instance, do not go for a home costing $300,000 if you qualify for $120,000 mortgage. By getting the financing right, you have an added advantage over other buyers targeting the same home. One core requirement by every seller is a mortgage pre-approval which gives you due advantage if the house has multiple offers and only you who has the approved plan. The plan also puts you on a better negotiating position with the seller.

Prepare to carry intensive shopping

Because the inventory of available homes is low during a seller’s market, a lot of time and indeed effort will be required. Therefore, you must be ready to carry an intensive search to reach more sellers and compare their offers. To raise the chances of selling homes at higher rates, sellers in a seller’s market make multiple offers in the first 24 hours to attract as many buyers as possible. By shopping widely, you will be able to see all the offers and take advantage of what is more affordable. If your search is only done on weekends, chances are that you will lose a lot on offers and diversity of available homes. Make sure you are available, search widely, follow listing sites and top real estate agents to get more homes and check what fits your preference.

Work with a top home buying agent

While getting the right home buying agent is critical when buying a home always, it is even more critical when buying in a seller’s market when you need to sell for 100% market valuation. Expert buyers have unique negotiating skills which are necessary in helping to drive price cuts. Such agents use their experience to help the buyer get a competitive edge and enjoy better terms. This can be in form of price cuts, deals on closing costs or advanced repairs on the new home. Make sure to get an agent who has been in the market for long enough and understands how to go about buying during the seller’s market.

Establish the contingencies that are absolutely necessary

The main reason that buyers offers are turned down is because they have very many contingencies. In a competitive seller’s market, putting a contingency like sale and title transfer will make the seller fail to consider it. Even though this is a crucial contingency in the normal market, when the sellers are few, there is ample supply of buyers who are ready to get a home without having to sell one. Another contingency that will make sellers fail to consider a buyer’s offer is home inspection. Though buyers have many reasons for insisting on a home inspection, it is advisable to waive it as part of the negotiation so that the purchase offer looks sweeter.

Maintain high flexibility

During a competitive seller’s market, there is high likelihood that the price will be higher compared to purchasing in a buyer’s market. It is, therefore, crucial that the buyer is more realistic and flexible. If one is able, having greater flexibility with deadlines and dates of contracts will provide an added advantage over other buyers. A good agent will be able to tell with ease what questions to put forward to a seller in order to structure the buying offer and navigate it to the purchaser’s advantage.

The bottom line

Purchasing a home during a seller’s market can be very challenging because the supply is limited, the prices are high and buyers are many. Because of this, being able to understand the market and use agents with vast experience is very critical. Ensure to follow all the recommendations they give, have financial plan right and maintain higher flexibility.