For many seniors in Florida, a reverse mortgage is a great way to access the equity in their homes and supplement their retirement income. If you own a condo and are wondering whether you can get a reverse mortgage on it, the answer is yes—even if your condo is not FHA-approved. There are still financing options available that allow you to take advantage of a reverse mortgage, regardless of the FHA status of your condo.
Let’s break down how reverse mortgages work for condos, what FHA approval means, and what options are available if your condo doesn’t meet FHA requirements.
How Does a Reverse Mortgage Work?
A reverse mortgage is a loan that allows homeowners aged 62 and older to borrow against their home equity. The most common type of reverse mortgage is the Home Equity Conversion Mortgage (HECM), which is insured by the Federal Housing Administration (FHA). The loan is repaid when the homeowner sells the home, moves out permanently, or passes away, and no monthly mortgage payments are required while living in the home.
Reverse mortgages are a popular choice for seniors who want to stay in their homes but need extra cash for retirement, healthcare, or other expenses. However, getting a reverse mortgage on a condo can sometimes be more complicated than on a single-family home, particularly if the condo is not FHA-approved.
What Does FHA Approval Mean for Condos?
FHA approval means that a condominium development meets specific requirements set by the FHA to ensure the property is safe and financially stable. For an FHA-backed reverse mortgage (HECM) to be available for condo owners, the entire condo complex must be approved by the FHA. This includes meeting standards related to:
- Financial health of the HOA (Homeowners Association): The condo’s HOA must demonstrate financial stability and proper management.
- Occupancy: A certain percentage of the condo units must be owner-occupied (rather than rented out).
- Maintenance and reserves: The condo association must maintain sufficient reserve funds for property upkeep and repairs.
Unfortunately, many condo associations do not go through the FHA approval process, which can limit reverse mortgage options for condo owners.
Can I Still Get a Reverse Mortgage if My Condo Is Not FHA Approved?
Yes, you can still get a reverse mortgage on your condo in Florida, even if it is not FHA-approved. Here are two ways you can secure reverse mortgage financing without relying on FHA approval:
1. Proprietary (Jumbo) Reverse Mortgages
If your condo is not FHA-approved, one option is a proprietary reverse mortgage. Also known as a jumbo reverse mortgage, this type of loan is offered by private lenders and is not insured by the FHA. Proprietary reverse mortgages typically cater to higher-value homes and condos that may not meet FHA guidelines.
Here are some key features of proprietary reverse mortgages:
- FHA approval is not required: Since these loans are offered by private lenders, the condo does not need to be FHA-approved.
- Higher loan limits: Proprietary reverse mortgages often have higher loan limits than HECM loans, which may be beneficial if your condo is in a high-value market like Miami, Tampa, or Orlando.
- Flexibility: These loans offer greater flexibility in terms of loan amounts and property types. Even if your condo doesn’t meet FHA’s strict guidelines, you may still qualify for a proprietary reverse mortgage.
Keep in mind that while proprietary reverse mortgages can provide more flexibility, they typically come with higher interest rates and fewer consumer protections than FHA-backed HECM loans. It’s essential to carefully weigh the benefits and risks before moving forward with this option.
2. Single-Unit Approval for FHA Reverse Mortgages (Spot Approval)
If you still prefer an FHA-backed reverse mortgage but your condo isn’t fully FHA-approved, another option is to seek single-unit approval, also known as spot approval. This option allows you to get an FHA reverse mortgage for your individual condo unit, even if the entire condo complex is not FHA-approved.
Here’s how single-unit approval works:
- Your individual condo unit can qualify for an FHA reverse mortgage if it meets specific FHA standards related to the financial stability of the condo association, occupancy, and maintenance.
- Lenders can request FHA spot approval for your unit without the condo association having to go through the full approval process for the entire complex.
- This process requires the lender to conduct additional due diligence, but it can be an effective way to secure an FHA-backed reverse mortgage for a condo in a non-FHA-approved building.
This process can take longer and may involve more paperwork, but it’s a viable option for those who want the protections of an FHA reverse mortgage.
Key Considerations for Getting a Reverse Mortgage on a Condo in Florida
When applying for a reverse mortgage on a condo, there are some Florida-specific factors to keep in mind:
- Homeowners Association (HOA) Fees: Condo owners must continue paying HOA fees even after taking out a reverse mortgage. Be sure you can cover these costs, as failure to pay HOA fees could lead to foreclosure.
- Property Taxes and Insurance: You’ll need to continue paying property taxes and homeowners insurance. Florida’s property tax rates vary depending on location, and homeowners insurance premiums can be high due to hurricane risks.
- Condo Maintenance: You are responsible for maintaining your condo to keep it in good condition. Make sure you have a plan to manage ongoing maintenance and repairs, as this will be a requirement of your reverse mortgage.
Benefits of a Reverse Mortgage on a Condo
Here are some of the benefits of securing a reverse mortgage on your condo in Florida:
- Supplement Retirement Income: A reverse mortgage can provide you with additional cash flow, whether through a lump sum, monthly payments, or a line of credit.
- Stay in Your Home: A reverse mortgage allows you to remain in your condo without having to sell it or move to access your home’s equity.
- No Monthly Payments: Unlike traditional mortgages, a reverse mortgage does not require monthly mortgage payments. The loan is repaid when the condo is sold, or when you move out or pass away.
- Tax-Free Proceeds: The funds you receive from a reverse mortgage are considered loan proceeds, not taxable income, so you can access the money without increasing your tax liability.
Can You Get a Reverse Mortgage on a Condo in Florida?
Yes, you can get a reverse mortgage on your condo in Florida, even if it is not FHA-approved. Through proprietary reverse mortgages or FHA single-unit approval, there are options available to tap into your condo’s equity and improve your financial situation in retirement.
If you’re ready to explore your options and see how a reverse mortgage can work for you, Select Home Loans can help guide you through the process. Contact SelectHomeLoans.com today to learn more about your reverse mortgage options and secure the financing you need to enjoy your retirement.