Most older homeowners know about the Reverse Mortgage Loan, but many still do not know about the Reverse Second Mortgage Loan.
I have completed several of these loans, and in all cases the clients were in their 70s. The traditional Reverse Mortgage Loan age qualification starts at 62 years old, so those borrowers were already eligible. However, I had learned that the reverse second mortgage option can start qualifying at age 55 in many states.
I assumed that because of the younger age requirement, the available loan amount would probably be very small. I was wrong.
Today using a reverse mortgage calculator I ran a quick scenario with some simple, fictitious numbers. The calculator only required four pieces of information:
- Date of birth for the youngest borrower
- Value of the home
- Balance of the first mortgage (if any)
- Zip code
For this example, I entered:
- Date of birth: March 5, 1970 (making the borrower 56 years old)
- Home value: $1,400,000
- Current first mortgage balance: $500,000
The result surprised me. The available cash from a reverse second mortgage in this example was $258,345.
For many homeowners in their mid-50s or early 60s, this could be a powerful financial tool. It may provide access to equity without refinancing the existing first mortgage something that can be especially helpful if the homeowner already has a very favorable rate on their primary loan.
General guidelines include:
- Minimum age: 55+ (Texas requires 62, Washington State 60)
- Must be current on the first mortgage
- Property must be the primary residence and properly maintained
- Minimum FICO score: typically around 640
- Borrower must be current on property taxes, homeowners insurance, and any HOA fees
As always, every homeowner’s situation is different. A reverse second mortgage is not the right solution for everyone, but for the right customer it can be a fantastic loan that helps unlock home equity while maintaining flexibility with their existing mortgage.
