Occupancy Requirements for Reverse Mortgage

One of the most important criteria to obtain HECM Reverse mortgage is the property on which the loan has been obtained should be the primary residence of the borrower during the life of the loan (i.e., till the loan is repaid, the home should be principle residence of borrower). Seniors can’t obtain loan on rental property.

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The occupancy restrictions do not stop here, they even have to be followed after the loan has been approved. So, if the borrower wants to take a long vacation, live in the second house or have to go to the hospital for extended period of time, they have to follow certain guidelines to ensure that the mortgage obligations are met. These situations are explained below in detail:

Staying out to attend medical treatment in hospital:

As per HECM loan documentation when the home on which mortgage is obtained is does not remain the principle home of the borrowers for 12 consecutive months because of physical or mental illness, the loan becomes due and the borrower has to pay the entire loan. If one of the borrowers remains in the home, then the loan will not become due. Many reverse mortgage borrowers overlook this fact and thus get themselves in trouble. 

Long Vacation:

There is no specified time for extended absence in the HECM loan documentation. According to the guidelines, at least one of the borrower’s must have the house as the principle residence at all times, else the loan becomes due. In general, borrowers can leave the property for certain period without any issues by notifying the loan servicer about their absence. If the property is abandoned by the borrower’s for extended period of time, the property would deteriorate due to lack of maintenance and this is a major concern for the loan servicer because the property should be in good condition with proper maintenance. 

Reverse Mortgage is a great way to use your home equity for cash but it is very important to know and follow rules and regulations even after your loan is approved to keep enjoying its benefits.

Inormation Sources: HUD website and internet research