One of the most important benefits of a senior reverse mortgage is that it helps the elderly remain in their house, while still offering some extra money through their home equity. But even though not all homes are physically suitable to the aging needs, several parts of the reverse mortgage can cover certain much-needed repairs so that the homeowners would live both comfortably and safely in their retirement time. Home equity conversion mortgage (HeCM) is one of the most common types of reverse mortgage that allows the borrowers aged 62 and above to access their home equity. The loan proceeds, or fund, obtained from this mortgage are not taxed and can be used for individual living costs without limit, including home repairs or health care. But before getting the first reverse mortgage to repair your home, it is necessary to understand basic information about this process.
What is a home appraisal?
To get a senior reverse mortgage for home repairs, you need first to obtain a home appraisal, which measures the value of your house. Along with your age, this factor will determine the amount and qualification of your mortgage. In addition, to qualify for the mortgage, you also need to prove that your house meets several standards or you have enough money to do the repairs.
Guideline to reverse mortgage appraisal
A home appraisal plays a key role in determining whether you can get a reverse mortgage for repairs. So an appraiser will not only measure the current value of your house based on the market price but also assess its physical state. During this process, he will depend on the safety and health requirements specified in the HUD Minimum Property Standards. If the appraiser finds out that your house is currently in a disrepair condition, then it is impossible to receive the reverse mortgage to repair.
The following states are qualified for repairs before you can get a reverse mortgage
– Leaky roof
– Termite damages
– Structural or foundation problems
– Other problems concerning safety
When your home does not meet the standards of the HUD, you need to resolve these issues first.
How does a reverse mortgage work in home repairs?
There are a couple of factors determining the number of proceeds that you are eligible to get a reverse mortgage to repair your home, including the appraised value, interest rate, and your age.
While the repairing process needs to be completed before closing a mortgage, ‘repair set-asides’ are a useful option when you cannot meet this criterion. Basically, this is a part of the reverse mortgage that is only used to complete the needed repairs as identified by the appraiser. A repair set-aside can be used to fix certain areas in your house that do not affect immediate safety and health. For example:
– Broken glass
– Exposed woods
– Cracked concrete
– Small plumbing fixes
– Pain problems
Keep in mind that all repairs specified by the appraiser should be complete within six months of closing. If not, other loans from your reverse mortgage might be frozen and can be called payable and due.