Taking out a reverse mortgage can allow retirees to access their home equity without making payments toward a home equity loan or a home equity line of credit (HELOC). There are several requirements to qualify for a reverse mortgage, and income is an important consideration. Reverse mortgag♍e companies use꧃ income and financial resources to assess a homeowner’s ability to meet certain costs, including property taxes and upkeep.

What Is a Reverse Mortgage, and🍌 Who Can Get One?

A 澳洲幸运5官方开奖结果体彩网:reverse mortgage is a special type of loan that allows eligible homeowners to turn their 澳洲幸运5官方开奖结果体彩网:home equity into an income stream. In a reverse mortgage arrangement, a homeowner can draw a 澳洲幸运5官方开奖结果体彩网:lump-sum payment or regular installment payments against their equity or have a 澳洲幸运5官方开奖结果体彩网:line of credit. These payments are made by a reverse mortgage compaﷺny.

During the homeowner’s lifetime, they aren’t obligated to pay anything toward the reverse mortgage balance as long as they use the home as their 澳洲幸运5官方开奖结果体彩网:principal residence. Interest and fees accrue in the meantime. If the homeowner sells the property, moves out of the home, or dies, the balance is payable in full.

A reverse mortgage that’s backed by the federal government through the United States Department of Housing and Urban Develo🅺pment (HUD) is called a 澳洲幸运5官方开奖结果体彩网:ho𝔍me equi📖ty conversion mortgage (HECM). It's available for 🍸homeowners age 62 or older who:

• Own their homes outright or have paid down most of the mortgage
• Aren't 澳洲幸运5官方开奖结果体彩网:delinquent on federal debt
• Live in the home as a principal residence
• Attend HUD-approved consumer 澳洲幸运5官方开奖结果体彩网:counseling

Applicants for an HECM also must be able to demonstrate that they have sufficient financial resources, in the form of income and/or savings, to be able to pay certain homeownership costs, which include 澳洲幸运5官方开奖结果体彩网:property taxes, 澳洲幸运5官方开奖结果体彩网:homeowners insurance, 澳洲幸运5官方开奖结果体彩网:homeowners association (HOA) fees (if applicable), 澳洲幸运5官方开奖结果体彩网:maintenance, repairs, and upkeep.

Reverse Mortgage Income Requirements

When a homeowner applies for an HECM, they’re subject to a cash flow/residual income analysis. According to HUD, this analysis aims to “determine the capacity of the 澳洲幸运5官方开奖结果体彩网:mortgagor to meet his or her documented financial obligations with his or her documented income.”

The HECM program can use income from a borrower, a 澳洲幸运5官方开奖结果体彩网:co-borrower, and an 澳洲幸运5官方开奖结果体彩网:eligible non-borrowing spouse for cash flow ana💮lysis calculations. Countable income can include both taxable and nontaxable income sources, such as:

• Wages, salaries, commissions, and tips
• 澳洲幸运5官方开奖结果体彩网:Self-employment income
• Rental income
• 澳洲幸运5官方开奖结果体彩网:Dividends and interest
• Trust income
• 澳洲幸运5官方开奖结果体彩网:Social Security benefits
• U.S.🐼 Department of Veterans Affairs (VA) benefit payments
• Federal government employee retirement benefits
• Railroad Retirement program benefits
• State government retirement income benefits
• Certain types of disability and public assistance benefits
• Child support
• Military allowances
• Other income that’s exempt from federal income tax

The cash flow analysis also includes an assessment of the homeowner’s liabilities and outgoing payments each month. Liabilities include obligations such as loan payments and credit card payments.

So, how much income do you need for a reverse mortgage? The answer depends on where you live. HUD𒈔 publishes a residual income table of sufficient monthly income levels by family size and region.

Source: U.S. Department of Housing and Urban Development

Reverse mortgage companies can consider extenuating circumstances for borrowers who don’t meet the minimum cash flow/residual income analysis guidelines. For example, someone who has received notice that they’re approved for 澳洲幸运5官方开奖结果体彩网:Supplemental Security Income (SSI) benefits that will begin within the next 12 months may be able to use that future income to be approved for a reverse mortgage.

Reverse Mortgage Alternatives

Homeowners who don’t meet the income requirements for a reverse mortgage may have other options for borrowing against their equity. For instance, they may be able to get ▨a home equity loan or a HELOC instead.

Which is better, a home equity loan or a HELOC? With a home equity loan, you can borrow a lump sum and use that money for virtually any purpose, including 澳洲幸运5官方开奖结果体彩网:debt consolidation, home repairs, and medical expenses. Your home equity loan is a 澳洲幸运5官方开奖结果体彩网:second mortgage, as the home secures it, so if you haven’t yet paid off your home in full, you’ll have to consider whether it’s feasible to have two mortgage payments.

Home equity loans typically have 澳洲幸运5官方开奖结果体彩网:fixed interest rates, while HELOCs generally have 澳洲幸运5官方开奖结果体彩网:variable rates. The advantage with a HELOC is that you’re not borrowing a lump sum; instead, you’re getting a line of credit that you can draw against as needed. This means that you only pay interest on the portion of your credit line that you use. You may pay nothing or make interest-only payments during the 澳洲幸运5官方开奖结果体彩网:draw period before your regular payments begin.

The Bottom Line

澳洲幸运5官方开奖结果体彩网:A reverse mortgage is not foℱr everyone, but it might prove a 澳洲幸运5官方开奖结果体彩网:ཧgood source of supplemental income in retirement, provided you can show sufficient income to qualify. The main attraction is that you don’t have to repay a reverse mortgage as long as you’re living in the home. However, you will still ne🍌ed to keep the home in good shape, make sure it’s prope🧸rly insured, and pay your property taxes.

If you’re married, it’s important to learn 澳洲幸运5官方开奖结果体彩网:how ꦐthe rules of reverse mortgages affect spouses. Your children and 澳洲幸运5官方开奖结果体彩网:unmarried partners can also be affected. And there are 澳洲幸运5官方开奖结果体彩网:residency rules that need to be considered.

If you’re interested in borrowing against your equity in this way, researching the best reverse mortgage companies can be a good place to start.