Arizona Reverse Mortgage Guide
Are you an older homeowner living in Arizona, or planning to retire in The Grand Canyon State, and seeking ways to supplement your retirement income?
With growing living expenses and inadequate adjustments to Social Security benefits, you are likely feeling discouraged. Fortunately, most senior Americans are homeowners, which makes them uniquely qualified to access cash using the very place where they lay their head every night — their home.
One effective way of leveraging your home equity without monthly mortgage payments is through a reverse mortgage.
This Arizona reverse mortgage guide provides a comprehensive overview of this unique financial product so that you can make an informed decision about whether a reverse mortgage is the right choice for you.
Understanding Reverse Mortgages
Home Equity Conversion Mortgages (HECMs), commonly known as reverse mortgages, are financial products specifically designed for homeowners who are 62 years old or older.
Reverse mortgage loans enable borrowers to unlock their accumulated home equity, converting it into accessible cash. Unlike traditional home equity loans or lines of credit (HELOCs) that require monthly payments at some point, reverse mortgages operate differently.
If you still have a conventional mortgage on your home, the first thing a reverse mortgage will do is settle that loan. The remaining reverse mortgage loan proceeds can be disbursed according to the homeowner’s preference: lump-sum, regular monthly payments, line of credit, or a combination of these.
No monthly payments are required to pay back a reverse mortgage. However, homeowners are obligated to pay property taxes, homeowners’ insurance, and maintain the home.
Repayment of a reverse mortgage is only triggered when the homeowners decide to permanently relocate, sell the house, or upon the passing of the last surviving homeowner.
Reverse mortgages are loans that are regulated by the U.S. Department of Housing and Urban Development (HUD), with the backing of the Federal Housing Administration (FHA).
Arizona Reverse Mortgage Eligibility Requirements
In order to be eligible for a reverse mortgage in Arizona, homeowners must meet certain specific criteria, including the following:
- Age. At least one homeowner must be at least 62 years old.
- Residency. The property must be the homeowner’s primary residence.
- Equity. It is recommended that homeowners possess a considerable amount of equity in their property.
- Condition of the home. The home should be well-maintained.
- Financial obligations. Homeowners should have the means to cover the ongoing property taxes, homeowners’ insurance, HOA fees (if applicable), and the proper maintenance of their home.
- Eligible property. The property should be eligible for a reverse mortgage. Eligible properties include single-family homes, 2-4 unit properties with the homeowner occupying one unit, FHA-approved condominiums, or approved manufactured homes.
- Counseling. Before applying for a reverse mortgage loan, individuals must fulfill the prerequisite of undergoing a comprehensive counseling session with a third-party counseling service approved by HUD.
How a Reverse Mortgage Can Help
Senior homeowners in Arizona can reap numerous benefits from reverse mortgages including the following:
Supplement Retirement Income. A reverse mortgage can provide a reliable and consistent source of income. This financial option assists in covering various expenses, including day-to-day living costs, unexpected medical bills, and other unforeseen financial obligations.
No Monthly Mortgage Payments. With a reverse mortgage, homeowners are not obligated to make monthly mortgage payments. However, they are responsible for property taxes, insurance, and home maintenance costs.
Age in Place. A reverse mortgage allows seniors to remain in their homes as they age, which can be beneficial for those who have been long-term residents and wish to remain close to loved ones.
Non-Taxable Income. Reverse mortgage funds are classified as loan proceeds rather than income, exempting them from taxation.
Flexible Payment Options. There are multiple disbursement options available with reverse mortgages, providing flexibility for borrowers to receive funds. There are multiple options available for receiving the money. You have the choice of receiving it in a single lump sum, as a line of credit, in monthly installments, or a combination of these methods.
Home Improvement. A reverse mortgage can provide funds for necessary home upgrades or renovations.
Enhance Retirement Plan. A reverse mortgage can also serve as a strategic component of an overall retirement plan, providing financial relief during market downturns and allowing the untouched balance to grow if the funds are received as a line of credit.
Available Reverse Mortgage Types in Arizona
Arizona residents have a range of reverse mortgage options available to them to meet their individual financial and personal requirements.
Home Equity Conversion Mortgage (HECM)
The most common type of reverse mortgage, HECMs are regulated by HUD and insured by the FHA. There are no restrictions on the use of reverse mortgage funds, but there is a limit on how much you are able to receive as determined by the FHA. The FHA lending limit is currently capped at $1,149,825 as of 2024.
Jumbo Reverse Mortgage
These proprietary reverse mortgages allow homeowners to borrow beyond the FHA’s lending limit. They carry higher interest rates and are not FHA-insured. At Mutual of Omaha Mortgage, our jumbo reverse mortgages are called HomeSafe Reverse Mortgages. They allow qualifying homeowners the ability to borrow up to $4 million.
Reverse Mortgage for Purchase (HECM for Purchase)
The Home Equity Conversion Mortgage (HECM) for purchase loan option offers a unique opportunity for homeowners to secure funding for their new homes with a reverse mortgage. This innovative approach empowers individuals to upgrade or downsize their homes during retirement, all while alleviating the financial strain caused by monthly mortgage payments. This may be a viable option for those who are looking to relocate to The Grand Canyon State for retirement.
Single-Purpose Reverse Mortgages
These less common loans are intended for specific lender-approved purposes, such as home improvements. Single-purpose revere mortgages, often referred to as tax deferral programs, are commonly provided by state and local governments or non-profit organizations.
Reverse Mortgage Borrower Rights in Arizona
As a federally regulated financial tool, reverse mortgages provide several rights and protections to Arizona homeowners:
Counseling. To obtain a reverse mortgage, it is mandatory for all applicants to participate in a counseling session conducted by a third-party HUD approved counselor. This session aims to educate borrowers on the intricacies of reverse mortgages, assess their appropriateness for their particular needs, explore alternate options such as home equity loans or HELOCs, and safeguard against undue influence from parties with a financial stake in the loan.
Non-recourse loan. Reverse mortgages are non-recourse loans, ensuring that neither the borrower nor their heirs will ever be liable for an amount exceeding the appraised value of the home.
Protections for Non-borrowing Spouses. As long as a non-borrowing spouse meets certain requirements when the loan is obtained such as being named on the loan documents, living in the house as their primary residence, and being legally married.
Arizona Reverse Mortgage Calculator
If you’re contemplating getting a reverse mortgage loan and are curious about the possible loan amount, our Reverse Mortgage Calculator is a great place to get started.
Please bear in mind that the number produced by this calculator serves as an approximation and might not be the same as the final approved amount.
For a more accurate evaluation, we highly recommend scheduling a consultation with one of our certified reverse mortgage loan experts.
Arizona Reverse Mortgage Loan Application Process
Considering a reverse mortgage in Arizona? Here’s what you can expect during the loan application process:
Step 1: Free Consultation with a Reverse Mortgage Specialist
Kick off the process with a free consultation with one of our reverse mortgage loan advisors. The will evaluate your financial situation, offer an estimate of potential benefits you may receive, and address any inquiries you may have. Our Mutual of Omaha Mortgage loan specialists are committed to guiding you at every stage, offering expert assistance throughout the process.
Step 2: Mandatory Counseling
Anyone who wants to apply for a reverse mortgage must first attend a counseling session conducted by a HUD-approved counselor. The aim of this session is to educate you about reverse mortgages, review their features, costs, and alternatives. Once you complete the session, the counselor will issue a certificate which you’ll need in order to move forward with your reverse mortgage application.
Step 3: Application Submission
After receiving your counseling certificate, your personal reverse mortgage loan advisor will walk you through submitting your application and required documentation, such as a valid photo ID, proof of homeowner’s insurance, and the current property tax bill. Timely submission of these documents speeds up the loan closure process.
Step 4: Property Appraisal
Once the application is submitted, Mutual of Omaha Mortgage will arrange an appraisal of the property. This critical step assesses your property’s current condition and market value, which in turn determines the loan amount. During this stage, we’ll also conduct a title search and credit report to identify potential liens and assess your financial stability. The average timeframe for completing this process is generally between one to two weeks.
Step 5: Underwriting and Processing
Next, your application and documents are reviewed by underwriting. If necessary, the underwriter may ask for additional documentation or recommend specific home repairs for loan approval. Your reverse mortgage loan advisor will ensure that you are continuously updated throughout this phase, providing clear communication about any required actions.
Step 6: Sign Closing Loan Documents
Upon loan approval by the underwriter, a closing date is set. You may sign the closing loan documents at the title company or at home via a traveling notary service.
Step 7: Start Receiving Funds
Once the three-business-day-waiting period ends, you can start receiving your funds. You may choose to receive funds as a lump sum, monthly payments, and/or a line of credit.
Find an Arizona Reverse Mortgage Loan Officer in Your Area
You can conveniently locate an Arizona Reverse Mortgage loan officer in your area through our loan officer directory or by clicking on one of links below to find a loan officer near you:
- Phoenix Reverse Mortgage Lender Near Me
- Tucson Reverse Mortgage Lender Near Me
- Mesa Reverse Mortgage Lender Near Me
- Chandler Reverse Mortgage Lender Near Me
- Gilbert Reverse Mortgage Lender Near Me
- Scottsdale Reverse Mortgage Lender Near Me
- Peoria Reverse Mortgage Lender Near Me
- Tempe Reverse Mortgage Lender Near Me
- Surprise Reverse Mortgage Lender Near Me
Reverse mortgage borrower must occupy home as primary residence and remain current on property taxes, homeowner’s insurance, the costs of home maintenance, and any HOA fees.
This information is intended to be general and educational in nature and should not be construed as financial advice. Consult your financial advisor before implementing financial strategies for your retirement.