Can a Disabled Person Qualify for a Reverse Mortgage?

Qualifications

The two chief qualifications for obtaining a reverse mortgage are being at least 62 and having substantial equity -- 50 percent or more -- in your principal residence. You also must not be delinquent on any federal debt, such as taxes. Before signing loan papers, you must participate in consumer loan counseling, which ensures you will fully understand the operation and impacts of a reverse mortgage. Unlike a traditional mortgage, you do not have to have good credit or income, because you will not be required to make any loan payments.

The Federal Housing Authority developed what has become the most used reverse mortgage program in 1987 at the direction of Congress. The purpose of the program was to allow seniors, especially those who had been long-time home owners who were at the threat of losing their homes in retirement, to draw off the equity so they could remain in their homes. One of the reasons a reverse mortgage works is that, although there are no limits on the duration of the loan, because of the seniors' advanced age, the loan is likely to be repaid before the outstanding loan balance exceeds the home's value.

According to the Lincoln Land Institute, nearly half of all states offer a tax deferral program to elderly and disabled home owners. These programs permit deferral of property tax, using the home owner's property as security, in much the same way the reverse mortgage does. Some states also have "circuit-breaker" programs that reduce taxes based on income; some of these programs are restricted to elderly and disabled home owners.

Loans made by private individuals, unlike those made by banks and regulated lenders, can be structured in almost any way, for any purpose. Children, for instance, might loan their parents money without requiring payments, knowing they will inherit their parents' home in the future. A disabled person could look to relatives to provide a loan secured by their property in the same way. Beware, however, of loans offered by groups or individuals you don't know or even ones from relatives if they seem too good to be true. Have an attorney look over the loan agreement before you agree to any terms.