One of the stipulations when qualifying for a reverse mortgage is that your home must appraise at a particular value and must pass inspection, proving to be in good enough condition for the government to be confident you are a low lending risk. This is highly ironic, since many seniors want to open a reverse mortgage so they can afford to make needed home repairs. The following questions and answers will help you navigate this tricky territory and come out with access to the money you’ve invested in your home and a beautiful house.

How is the Condition of Your Home Related to Qualifying for a Reverse Mortgage?

One of the factors evaluated when qualifying for a reverse mortgage is the condition of your home. An appraiser will compare the market value of your home to others in the area, taking into account the condition of your home. The lender will review the appraiser’s report and determine how much they are willing to lend to you because the lender has to be sure the amount they lend can be recouped upon the future sale of your home. If your home does not meet FHA minimum property standards, you may not qualify for a reverse mortgage, or the amount for which your qualify may be disappointingly low.

What if You Want to Use Your Reverse Mortgage to Pay For Home Repairs?

Many seniors take out reverse mortgages specifically to make home repairs. If your home is in disrepair, talk to your lender about a “repair set aside”, which is when you get estimates for required home repairs and then close on the reverse mortgage. The lender will “put aside” 150% of the estimates and the expenses related to the repair administration fee, with the understanding that you will use the money that was set aside for the agreed-upon repairs.

How Can Making Home Repairs Improve Your Reverse Mortgage Benefits?

Any money you take out of reverse mortgage and use for home repairs is considered tax-deductible income, meaning you can write off the interest charged on the money used for improving your home.  It’s important to keep good records for tax purposes, demonstrating that the money withdrawn really did go towards home improvement projects.

Why Are Home Repairs Considered “Special” by Lenders of Reverse Mortgages?

Lenders are willing to give you that tax-break incentive because every home improvement you make increases the chances of your home reselling at a good price, which is essential to recoup the money lent through the reverse mortgage. This is why you get a tax break for using the money for home repairs, but you don’t get a tax break for using the money withdrawn for medical expenses or a trip to Italy.

How Does the Condition of Your Home Affect the Terms of Your Reverse Mortgage?

Once you’ve opened a reverse mortgage, you have to continue to maintain your home or risk losing the mortgage. One of the stipulations of the reverse mortgage is that you must not let the house fall into disrepair. The lender will send an appraiser to your home from time to time to check the condition of the home.

Home Repair Reverse Mortgage Scams

It’s advisable to be wary of home improvement companies that approach you and encourage you to take out a reverse mortgage through their preferred lender and say they will remodel your home for you. While there are legitimate home improvement companies, there are also plenty of scams reported where unsuspecting home owners use unethical lenders who charge outrageous fees or they give money to contractors who never finish the work. Always make sure the lender and contractors are reputable before signing any papers.