Everybody dreams of having a property that they can call their own. Especially, when it comes to owning a home. Fortunately, we have woven the threads of our society with lots of facilities for people requiring financial support. One of these facilities is a reverse mortgage. It is a financial contract made between you and the government, mostly after retirement. However, there are some formalities that you need to fulfill in order to become eligible for this type of a contract. Here are 7 things you need for a reverse mortgage:
Minimum age
The government emphasises on having all the applicants over the age of 62. Anybody below this age is not allowed to apply for a reverse mortgage and even if they do, the application is either rejected or not processed at all. Along with an age constraint, the applicant is expected to borrow a reverse mortgage ideally for accompanying their retirement income.
Primary residence
The borrower must be the resident of the house for which the loan is being taken. It should be their primary residence. It is mandatory for you to show that you have been living there for a specific number of years to fulfill the eligibility criteria for a reverse mortgage.
Type of residence
The type of residence you are applying for is the second most important criteria for the application. You cannot apply for a reverse mortgage if the residence is simply a farmhouse on a hill station. It ought to be your primary residence for you to be eligible for a reverse mortgage.
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Enough equity in the house
Even if you are the resident of the house that you are taking the loan for, which you have agreed is your primary residence, your equity in that house matters. Typically, you are required to have a minimum of 50% equity on that particular house.
Clear your first mortgage
Even if you fulfill all the above criteria, fulfilling this one is a little tricky. You can only apply for a reverse mortgage if you have already cleared your existing mortgage or if you are about to clear it off. You are not eligible to apply otherwise.
Pay off your mortgage
When you get your reverse mortgage approved, you are required to make a declaration that you shall be using it to pay off the remaining loan amount for your house. Thus, finally, after doing so, you can call it your own home.
Payment of charges related to property
The government, as an issuer, can ask you to fulfill as many criteria as they wish to. They expect the borrowers to declare that they shall continue to pay all the existing taxes or charges related to the property for which the reverse mortgage is taken. These charges can include the insurance of the house or any other taxes that are to be taken care of by you, which would not be a part of the amount of the reverse mortgage.
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