A reverse mortgage is a mortgage loan for people who are 62 and over (and in some cases 55 and over). They are able to use their home as part of their retirement plan, and they are able to pull money out without making a monthly payment. 

There’s a really big misconception regarding reverse mortgages. A lot of people think that this is a loan of last resort, meaning if you’re in foreclosure, if you have no other choice, you have this option, but that’s what it used to be before 2015. In 2015, they started looking at credit and income to make sure that you can qualify to pay your property taxes and homeowner’s insurance, other property expenses, and anything that’s on your credit as well. So this is not a loan for someone who is in foreclosure or someone who has missed payments on their credit over the last 2 years of qualifying.

Let’s use as an example a client who is trying to apply for a reverse mortgage and whose husband passed away. Initially, one would think that it would work, but after really digging deeper, we realize that, even after he passed away and after things got better, she continued missing payments and the house was in disrepair. Under those circumstances, this client wouldn’t qualify and, to help her, my advice would be: “You need to sell. You need to get out of here. Fix your credit and then look at buying something else”. If this were a loan of last resort, then she would have qualified despite the payments missed and the bad house conditions. The point here is that you need to be doing well, you need to have money, and you need to have good credit to get the reverse mortgage. People think they have to wait until they have no other choice to apply for it, but you can’t wait until you have no other choice. It needs to be done when you have enough income and your credit is doing well. 

So remember that if right now things are going well if you are working, you have money, and you’re of age for a reverse mortgage, maybe you should take one out just to have it there, just in case you need it during the next recession. You could keep making the mortgage payment, but you have your security blanket in place. Think about this old saying in the mortgage business, or in lending in general: “When you DON’T need the money, everyone wants to lend it to you. When you DO need the money, nobody’s gonna lend it to you”.

Written by Phil Stevenson, CRMP Owner & Principal MLO of PS Mortgage Lending, 1 of less than 200 Certified Reverse Mortgage Professionals (CRMP). Phil was interviewed and featured in Forbes 3 times since 2015 and has been offering reverse mortgage loans since writing one for his grandparents in 2008.