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Updated on Wednesday, January 30, 2019
Some people are under the mistaken impression that you can’t get a reverse mortgage on a manufactured home. That’s not true. The requirements eliminate some kinds of manufactured homes, and the process can be challenging, but, yes, owners of manufactured homes do qualify for reverse mortgages. Here’s the short course on reverse mortgages: A reverse mortgage lets you pull equity out of a home you own. For many retirees, a home is their biggest asset — much larger than any savings or investment account. Being able to access that money and use it to pay for the expenses of everyday living can be a very smart approach to retirement planning.
Being able to access this money can keep you from spending down your savings too fast, and it can also protect you during a market downturn because you won’t have to sell investments at a bad time.
Most of the reverse mortgages in the United States are Home Equity Conversion Mortgages or HECM, commonly referred to as “heck-em.” The are regulated and insured by the Department of Housing and Urban Development, of HUD, and the Federal Housing Administration, or FHA.
Here are the basic eligibility requirements:
- You must be at least age 62.
- The home you own must be eligible. If it is a manufactured property, the guidelines are stringent. We’ll get to that later.
- You must have paid off the mortgage or have considerable equity.
- The property must be your principal residence.
- You must not owe the IRS back taxes or have any other delinquent federal debt.
- You must have enough financial resources to continue to pay property taxes, insurance and any other homeowner association fees.
- Completion of a HUD-approved HECM counseling course also is required. Find a course here.
The rates on most reverse mortgages are adjustable. As long as you live in the home and it remains your principal residence, you will be able to receive payments from your equity and you won’t have to pay any of the reverse mortgage back. The lender collects after you move out or die.
There are five ways you can set up one of these.
- Tenure. You receive equal monthly payments as long as you or your spouse lives in the home and continues to pay taxes and insurance.
- Term. You agree to receive equal monthly payments for the number of months you choose.
- Line of credit. You can take out money if and when you need it. In this plan, you can exhaust the available money, so it requires careful management.
- Modified tenure. This plan combines a line of credit and scheduled monthly payments. The payments last as long as you live in the home.
- Modified term. This combines a line of credit with guaranteed monthly payments for the number of months you choose.
What is a manufactured home vs. a mobile home?
First, you can’t get reverse mortgages on mobile homes built before 1976. These older structures don’t qualify because their construction doesn’t meet current code standards. A manufactured home is built to the Manufactured Home Construction and Safety Standards, or as it is usually called, the HUD Code. This code took effect June 15, 1976, so any manufactured home built before that is automatically ineligible for a reverse mortgage.
How do you tell the difference between a manufactured home and a mobile home?
A manufactured home — post-1976 — is legally required to display a red certification label on the exterior of each transportable section. Manufactured homes are built in a plant and transported in one or more sections on a permanent chassis. If you own a manufactured home on which you would like to put a reverse mortgage, one of the things you should check before you start the application process is whether this red HUD label is actually there. You can usually find it on the tail end of the home. If the manufactured home was transported in two sections, there will be a label on the tail of each section.
You also must locate the home’s data plate. It can be found inside the home, on or near the main electrical breaker box.
Removal of either of these pieces of documentation from a manufactured home is illegal, according to HUD regulations. If you don’t have both the red certification label and the data plate — even if you are certain the unit was built after 1976 — you probably will be unable to get a reverse mortgage.
How can your manufactured home qualify for a reverse mortgage?
Here is a list of other requirements, gathered from HUD and other sources and confirmed by the National Reverse Mortgage Lenders Association.
- It must have a permanent foundation built to HUD requirements. The requirements, listed here, are complex. Chances are your recently constructed manufactured home meets them, but if it has been modified, it may not.
- In any case, an engineer must certify that the unit meets the requirements.
- Your home cannot have been moved from the original location where the factory placed it. It must have been permanently located where it is now.
- The home must be a minimum of 800 square feet. Generally, that means it has to be at least a double-wide.
- The home must have been built and remain on a permanent chassis, but wheels, axles and any hitches must have been removed.
- The home must be permanently attached to the property.
- The home must have skirting.
- The grade must be above the 100-year-flood plain.
- The utilities must be permanently installed and protected from freezing.
- Any mortgage must cover both the home and the ground on which it sits, and you must own that property.
- Your home must be classified — and taxed — as real estate. If you classified it as “personal property” in order to save on taxes, it doesn’t qualify. You’ll have to retitle it as real property.
- If there is a lease involved, in the name of the builder, and the property is titled that way, you may have serious issues getting a reverse mortgage.
How to apply for a reverse mortgage on a manufactured home
Find an FHA-approved lender who is willing to make a reverse mortgage loan on this sort of property and follow its guidelines. Here’s HUD’s reverse mortgage lender list. Shop around. The cost and some requirements will vary.
Before you even contact the lender, you might want to use LendingTree’s calculator to see how much money you are likely to be able to borrow.
The smart use of a reverse mortgage can be a lifesaver for older people who are underfunded for retirement. Living in a manufactured home doesn’t automatically disqualify you from using this financing tool.
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