Will A Reverse Mortgage Work If My Home Needs Repairs?

What if you want to do a loan on your home, but you know the home needs repairs to qualify?

Under the traditional loan requirements, you need to fix the deficient aspects of the property and then you can do a loan. What makes a reverse mortgage unique is the ability to do a loan first and then, after it closes, do the repairs. This allows you to get the money needed to do the repairs from the equity of your home.

Some of the more common scenarios are:
1. Decks covered with indoor outdoor carpet (the stuff that looks like fake grass), causing the deck board to rot.
2. The southern side of the home is peeling paint due to all the sun exposure.
3. Softer, squishy areas around the tub and toilet, indicating dry rot.

Any of the problems that do not involve safety or health concerns can be completed after the loan closes. Problems like not having adequate water to the property would be an example of a problem that can't wait, but dry rot and roofing repairs can almost always be completed after the loan closes.

You say you want to know how the lender ensures that the repairs get done. Well thank you for asking. A bid from a licensed contractor will be required, and then add 50% to that bid to cover any miscalculation or budget overages that might come up. The money for repairs, plus the extra amount, is held back in an escrow account called an "escrow holdback". Upon the repairs being completed the lender will pay the contractor, and you will be refunded any difference.

What if you want to do the repairs yourself? You can. You will still need to have the contractor bids though, and the escrow hold back is still required. The lender is looking for a professional estimate of what the repairs will cost.

Summarizing what you learned: What make a reverse mortgage unique is you can use the proceeds from your loan to do the repairs, and the escrow holdback is mandatory regardless of who does the repairs.

One of the first steps in knowing what you can do, is knowing how much you qualify for. Use our free reverse mortgage calculator for a quick estimate of what is available to you. There's a lot of reverse mortgage information that is helpful in becoming, educated before you make your decision.