Arizona homeowners will need to meet the following requirements to qualify for monthly mortgage payments through a reverse mortgage:

• Homeownership/Equity: Arizona law requires reverse mortgage borrowers to either own their homes outright or have a low mortgage balance. Additionally, they must have sufficient home equity, usually at least 50%. The property must also be a principal residence and a single-family, condo, townhome, or manufactured house.
• Borrower Age: Arizona also requires at least one borrower to be 62 years old to qualify for a reverse mortgage. A non-borrowing spouse doesn’t need to meet this age requirement as long as one applicant does.
• No Federal Debt: Many reverse mortgage loan programs are federally insured, meaning borrowers can’t have any current federal debt to qualify.
• Home Condition: With a reverse mortgage, homeowners are expected to keep their homes in good condition. This includes making prompt repairs throughout the life of the loan. Additionally, the borrower must pay property taxes and maintain an active homeowners insurance policy to receive funds through a reverse mortgage.
• Counseling Requirement: The U.S. Department of Housing and Urban Development (HUD) requires reverse mortgage loan applicants to complete financial counseling.

Individual Arizona lenders may have additional requirements. For example, some lenders allow existing mortgages as long as the remaining balance is minimal.

A borrower interested in a reverse mortgage should also consider the fees required to close the loan. A reverse mortgage loan in Arizona includes origination, appraisal, inspection, and title fees. Another cost to consider is mortgage insurance premiums.

Of course, the homeowner is also expected to keep up with property taxes, homeowner’s insurance, HOA fees, and home maintenance costs, but the borrower is likely already paying these costs.

Interest rates will also affect how much you pay for a reverse mortgage. Interest rates continually fluctuate, making working with a trustworthy lender important. District Lender has earned a reputation in the mortgage industry for our ability to connect borrowers to the most competitive rates. A reverse mortgage should help you and your family achieve your goals, and expensive financing fees shouldn’t cut into your available funds.

Arizona law does allow beneficiaries to inherit a house with a reverse mortgage. However, heirs are not eligible to receive funds from the lender as the original borrower did. However, they can keep the property after fulfilling the loan balance. This requires them to purchase the house, which may include cash or obtaining other financing.

Heirs are also eligible to sell the house if they prefer, and they can use the proceeds to pay the loan balance. Heirs also have the choice to return the house deed to the lender. The lender will then sell the property, collect the funds to fulfill the loan balance, and pay anything left over to the heirs.

Arizona reverse mortgage lenders require repayment after the original borrower moves from the home or upon their death. If the borrower leaves the property for 12 consecutive months, such as to move to an assisted living facility, the loan must be repaid. Heirs are not expected to repay any monthly payments received during the loan’s life.

It’s important to know the potential risks of any loan type you’re considering. The risks of a reverse mortgage tend to be financial, inheritance, and foreclosure-based.

High fees can turn some borrowers away from reverse mortgages. However, working with an experienced lender, like District Lending, can help borrowers control costs. Our team works hard to help homeowners through the process, which includes securing the most competitive current interest rate and being transparent about fees.

Uncertainty around property inheritance with a reverse mortgage can also create hesitation. District Lending is here to answer all your questions about reverse mortgages, including how they may affect your heirs.

Foreclosure is also possible with a reverse mortgage, just as with a conventional mortgage or any other loan type. However, the most common cause of foreclosure on a reverse mortgage is failing to maintain the property or keeping up with the required fees. As long as you pay property taxes, maintain homeowner’s insurance, keep up with HOA fees, and maintain home improvements, foreclosure shouldn’t be an issue. Predicting your finances related to factors like homeowners insurance and home maintenance costs can help avoid foreclosure.