Reverse Mortgage Equity Requirements Explained

How Much Equity Do You Need to Get a Reverse Mortgage?

There is no specific, set-in-stone equity requirement for a reverse mortgage. However, in most cases, borrowers should have at least 50% home equity if they want to apply. Like we’ve mentioned in other articles, the FHA-insured HECM (Home Equity Conversion Mortgage) is the most common type of reverse mortgage in the U.S. HECM rules simply state that a borrower must either fully own their property, or must have a “considerable amount” of equity in the property in order to qualify.

However, since there is no specific percentage stated, the exact amount will be determined by your individual lender, which will take into account your age, financial situation, and a variety of other factors. Despite that, the vast majority of borrowers will need to have at least 50% home equity in order to qualify. In part, this is because the HECM is first used to pay off any remaining debt a borrower has on their home before beginning to provide the borrower any reverse mortgage funds.

Things are slightly different for proprietary reverse mortgages, which are not insured by the FHA. In order to determine home equity requirements for a non-HECM reverse mortgage, you should check with the individual lender in order to determine their specific requirements. However, if you have less than 50% equity, getting any kind of reverse mortgage (including a proprietary one) may simply be more trouble than it’s worth.

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