Who is a Homeowner Who is at Least 62 Years Old?
Under federal law, specifically the U.S. Code related to the Department of Housing and Urban Development (HUD), a homeowner (or their spouse) who is at least 62 years of age is defined as an “elderly homeowner”. This designation is primarily significant for qualifying for certain financial products and government-sponsored programs designed to assist older adults with their housing and finances. These programs address the common situation where seniors may be "house rich" but "cash poor"—having substantial home equity but limited cash flow for living expenses.
Reverse Mortgages: Accessing Home Equity
For a homeowner at least 62 years old, the most recognized financial tool is the reverse mortgage, with the Home Equity Conversion Mortgage (HECM) being the most common, federally-insured version. A reverse mortgage differs from a traditional home equity loan in several key ways:
- No monthly payments: The borrower does not make monthly mortgage payments. Instead, the loan balance grows over time with accrued interest.
- Owner retains title: The homeowner retains the title and ownership of the property.
- Repayment triggers: The loan typically does not require repayment until the last surviving borrower dies, sells the home, or permanently moves out.
- Flexibility: The borrowed funds can be received in various ways, including a lump sum, a line of credit, or monthly payments.
To qualify for an HECM, borrowers must meet specific criteria set by the Federal Housing Administration (FHA):
- Age: The youngest borrower must be at least 62.
- Residency: The home must be the borrower's primary residence.
- Equity: The borrower must either own the home outright or have a low mortgage balance.
- Counseling: The borrower must attend a counseling session with a HUD-approved agency.
- Property Charges: The borrower must have the financial capacity to continue paying property taxes, insurance, and maintenance fees.
Property Tax Exemptions and Assistance
Many states, counties, and municipalities offer property tax exemptions or deferral programs specifically for elderly homeowners to help lower their financial burden. While age requirements can vary, being over 62 is often a gateway to qualifying. These programs can provide significant savings for those on a fixed income.
Types of Senior Property Tax Relief Programs
- Senior Citizen Homestead Exemptions: Reduces the assessed value of a home for tax purposes, lowering the overall tax bill. Many jurisdictions set the minimum age at 65, but some offer benefits at 62.
- Senior Freeze Programs: "Freezes" the home's assessed value at a certain point, preventing it from increasing due to market appreciation. Eligibility typically includes an age minimum (often 65) and income limits.
- Tax Deferral Programs: Allows eligible seniors to defer payment of all or a portion of their property taxes until the home is sold or changes ownership. These are essentially low-interest loans from the government.
Reverse Mortgages vs. Home Equity Loans
| Feature | HECM Reverse Mortgage | Traditional Home Equity Loan (HELOC) |
|---|---|---|
| Minimum Age | 62+ (youngest borrower) | None (typically 18+) |
| Payments | No monthly payments required | Requires monthly principal and interest payments |
| Loan Repayment | When last borrower dies, sells, or moves out | Paid off over a set term or when draw period ends |
| Impact on Equity | Loan balance increases, reduces equity | Loan payments decrease balance, rebuilds equity |
| Source of Funds | Lump sum, line of credit, or monthly payments | Line of credit (HELOC) or lump sum (Home Equity Loan) |
| FHA Insurance | Most common HECM version is federally-insured | Not federally insured |
| Counseling | Required with a HUD-approved counselor | Generally not required |
Potential Risks and Considerations
While a reverse mortgage can be a powerful financial tool, it is not without risks. An elderly homeowner should be aware of several important factors before proceeding:
- Property charges: Failure to pay property taxes or homeowner's insurance can lead to foreclosure.
- Increasing loan balance: The loan balance increases over time, accruing interest, which can significantly reduce the remaining home equity available for heirs.
- Need for counseling: Required counseling is designed to ensure the borrower fully understands all loan terms, fees, and potential implications.
- Impact on benefits: In some cases, receiving a lump sum can affect eligibility for needs-based government programs like Medicaid, though Social Security and Medicare are not typically impacted.
- Scams: Seniors must be wary of scams, as dishonest companies may push them toward financial products they do not need.
The Role of the HUD-Approved Counselor
All HECM applicants are required to attend a counseling session with a HUD-approved agency. This is a crucial step for a homeowner over 62 considering a reverse mortgage. The counselor's role is to provide unbiased information and discuss all alternatives, ensuring the applicant makes an informed decision that aligns with their long-term financial goals. This session covers loan costs, payment options, and the borrower's ongoing obligations to maintain the property and pay taxes.
Conclusion
A homeowner who is at least 62 years old has access to a range of financial options designed to enhance their retirement security. The term "elderly homeowner" is particularly relevant for the Home Equity Conversion Mortgage (HECM), a federally-insured reverse mortgage that allows access to home equity without monthly payments. Other benefits often include property tax relief programs such as exemptions and freezes. While these opportunities can be beneficial, they come with important considerations, including the potential reduction of home equity for heirs and the obligation to cover ongoing property charges. It is essential for a homeowner at least 62 years old to conduct thorough research, attend required counseling, and consult with a trusted financial advisor to determine the best path for their specific circumstances.
Visit the Consumer Financial Protection Bureau (CFPB) to learn more about reverse mortgages.
