Reverse Mortgage

A reverse mortgage is a home loan designed for older homeowners who want to access part of the equity in their home.

Unlike a traditional mortgage, a reverse mortgage does not require monthly principal and interest payments.

That does not mean the loan is free.

Interest and other loan costs are added to the balance over time, which means the amount owed generally increases instead of decreases. Consumer Financial Protection Bureau

For the right homeowner, a reverse mortgage can be a useful retirement planning tool.

For someone else, it may not make sense at all.

That is why I think the first step should be understanding how the loan actually works.

How Does a Reverse Mortgage Work?

A reverse mortgage allows you to borrow against a portion of the equity in your home.

You still own the home.

The lender does not take title to your property.

Depending on the program, the proceeds may be available as:

• A lump sum
• Monthly payments
• A line of credit
• A combination of those options

The amount available depends on several factors, including:

• Age
• Home value
• Existing mortgage balance
• Interest rates
• Reverse mortgage program

The older the borrower and the more equity available, the more proceeds may generally be available.

Learn How a Reverse Mortgage Works

Do You Have to Make Monthly Mortgage Payments?

One of the biggest differences between a reverse mortgage and a traditional mortgage is that there are generally no required monthly principal and interest payments.

You can usually remain in the home as long as you continue meeting the requirements of the loan.

You are still responsible for:

• Property taxes
• Homeowners insurance
• Maintaining the property
• Using the home as your principal residence

Those obligations are important.

If they are not met, a HECM can become due and payable.

Do You Still Own Your Home?

Yes.

This is probably one of the most common misconceptions about reverse mortgages.

You do not give your home to the bank.

The title remains in your name.

The reverse mortgage is simply a loan secured by the property, similar to other mortgages.

What Age Do You Have to Be for a Reverse Mortgage?

It depends on the program.

For an FHA-insured Home Equity Conversion Mortgage, commonly called a HECM, the minimum age is generally 62.

Some proprietary or jumbo reverse mortgage programs may be available to homeowners as young as 55, depending on the lender and state.

Those proprietary programs are private loans and are not FHA-insured.

Learn More About Reverse Mortgage Requirements

What Is a HECM Reverse Mortgage?

A Home Equity Conversion Mortgage, or HECM, is the most common type of reverse mortgage.

HECMs are insured by the Federal Housing Administration.

They are available to qualifying homeowners age 62 and older.

HECM borrowers may be able to receive proceeds through several different methods, including a line of credit, monthly payments, or a lump sum depending on the loan structure.

HECM loans also include federal protections that do not necessarily apply to proprietary programs.

Learn More About HECM Reverse Mortgages

What Is a Jumbo or Proprietary Reverse Mortgage?

A proprietary reverse mortgage is a private reverse mortgage offered by a private lender.

These programs are often designed for homeowners with higher-value properties or borrowers who do not fit the HECM program.

Some proprietary programs may:

• Be available at younger ages
• Allow larger loan amounts
• Work differently than HECM programs
• Have different credit requirements
• Have different property requirements

Because these are private programs, guidelines can vary significantly from one lender to another.

Learn More About Jumbo and Proprietary Reverse Mortgages

Can You Get a Reverse Mortgage If You Already Have a Mortgage?

Yes.

You do not need to own the home free and clear.

If you currently have a mortgage, it generally needs to be paid off as part of the reverse mortgage transaction.

The reverse mortgage proceeds are used first to pay off the existing mortgage.

Any remaining proceeds may then be available to the borrower.

For example:

Suppose your home is worth $700,000 and you still owe $100,000.

If the reverse mortgage provides enough proceeds to pay off that $100,000 mortgage, the existing loan can be eliminated as part of the transaction.

That means the homeowner would no longer have the required monthly principal and interest payment associated with the old mortgage.

The borrower would still be responsible for taxes, insurance, maintenance, and other loan requirements.

How Much Equity Do You Need?

There is no single percentage that applies to everyone.

The amount of equity required depends on:

• Age
• Home value
• Existing mortgage balance
• Interest rates
• Program
• Loan costs

Generally, you need enough equity for the reverse mortgage proceeds to pay off any existing liens and still meet the program requirements.

This is one area where I do not like quoting a fixed percentage because the numbers can change.

Can You Get a Reverse Mortgage With Bad Credit?

Possibly.

A reverse mortgage is not approved the same way as a traditional mortgage.

For HECMs, lenders perform what is called a financial assessment.

The lender looks at things like:

• Credit history
• Property tax history
• Homeowners insurance history
• Income
• Monthly obligations
• Residual income

The goal is to determine whether the borrower is likely to be able to continue paying property taxes, insurance, and other property-related expenses.

A lower credit score by itself does not necessarily mean you cannot qualify.

Learn More About Reverse Mortgage Requirements

What Is a Life Expectancy Set-Aside?

Sometimes a borrower may still qualify for a HECM but the lender determines that part of the loan proceeds should be set aside to pay property taxes and insurance.

This is commonly called a Life Expectancy Set-Aside, or LESA.

The servicer uses those funds to help pay property charges over time.

This can reduce the amount of money available to the borrower at closing, but it may also allow a loan to work when the financial assessment would otherwise be an issue. CFPB explains that HECM lenders may require a set-aside when they determine one is needed to cover future property charges.

Reverse Mortgage Line of Credit

One of the most useful HECM options can be a reverse mortgage line of credit.

Instead of taking all of the available proceeds upfront, the homeowner may leave part of the money in the line and access it later.

An important feature of the HECM line of credit is that unused borrowing capacity can grow over time.

That does not mean you are earning interest on the money.

It means the amount you may be able to borrow in the future can increase under the HECM line-of-credit structure.

This can make the line of credit useful for homeowners who do not need all of the money immediately.

Learn More About the Reverse Mortgage Line of Credit

Can You Use a Reverse Mortgage to Buy a Home?

Yes.

A HECM can also be used to purchase a home.

This is often called a HECM for Purchase.

Instead of buying the home with cash or taking out a traditional mortgage, an eligible buyer can use a reverse mortgage as part of the purchase.

The borrower brings a down payment, and the reverse mortgage finances the remaining eligible portion.

This can be useful for someone who wants to:

• Downsize
• Move closer to family
• Relocate for retirement
• Purchase a more suitable home
• Preserve more retirement savings

Learn More About Reverse Mortgage Purchase

What Happens to the Loan Balance?

Unlike a traditional mortgage, the balance generally increases over time.

That is because:

• You are borrowing money
• Interest accrues
• Certain loan costs may be added to the balance

If you choose not to make voluntary payments, the balance grows.

That is one of the biggest tradeoffs of a reverse mortgage.

You may improve your cash flow today, but you are also using home equity.

Can You Make Payments on a Reverse Mortgage?

Yes.

Monthly principal and interest payments are generally not required, but that does not mean you are prohibited from making payments.

A borrower can usually choose to make voluntary payments toward the balance.

Some homeowners do this to reduce the amount of interest that accumulates.

Others prefer not to make payments and use the cash flow elsewhere.

When Does a Reverse Mortgage Have to Be Repaid?

A reverse mortgage is generally repaid when the last borrower or applicable eligible non-borrowing spouse:

• Sells the home
• Permanently moves out
• Dies

The loan can also become due earlier if important borrower obligations are not met, such as paying property taxes, maintaining insurance, or keeping the home as the principal residence.

What Happens When the Home Is Sold?

The process is similar to selling a home with a regular mortgage.

The reverse mortgage balance is paid from the sale proceeds.

Any remaining equity belongs to the homeowner or the estate.

For example:

Suppose the home sells for $700,000 and the reverse mortgage payoff is $300,000.

After paying the loan and normal selling expenses, the remaining equity belongs to the homeowner or estate.

What Happens When the Borrower Dies?

The lender does not automatically take the house.

The heirs generally have options.

They may:

• Sell the home
• Pay off the reverse mortgage
• Refinance the loan and keep the property
• Turn the property over to the lender if appropriate

For HECMs, federal rules also provide protections when the loan balance exceeds the value of the property. CFPB explains that heirs may generally satisfy a HECM by paying the loan balance or, when the balance exceeds the home’s value, by using the applicable appraised-value provisions.

Learn More About Reverse Mortgages and Heirs

What Does Non-Recourse Mean?

HECM reverse mortgages are generally non-recourse.

In simple terms, the borrower or heirs are not personally responsible for a HECM balance beyond the applicable value of the home under program rules.

This is an important protection.

It means the reverse mortgage should not create a personal debt that follows the heirs simply because the loan balance eventually exceeds the property value.

What Happens to a Younger Spouse?

This is an area that needs to be reviewed carefully.

A spouse who is not a borrower may have certain protections under HECM rules if they meet the requirements to be considered an Eligible Non-Borrowing Spouse.

That can potentially allow the spouse to remain in the home after the borrowing spouse dies or permanently leaves the property.

The exact rules matter, so this is something I would review before closing rather than assume the younger spouse is automatically protected.

What Properties Can Qualify?

Depending on the program, eligible properties may include:

• Single-family homes
• Certain condominiums
• Some manufactured homes
• Certain multi-unit properties
• Planned unit developments

Property eligibility can vary between HECM and proprietary programs.

Condominiums and manufactured homes can have additional requirements.

Do You Need Reverse Mortgage Counseling?

For a HECM, counseling with a HUD-approved reverse mortgage counselor is required.

This is not the lender’s counseling session.

The counselor is independent and is there to help the borrower understand:

• How the loan works
• Costs
• Responsibilities
• Alternatives
• What happens when the loan becomes due

CFPB recommends that prospective HECM borrowers speak with a federally approved housing counselor before proceeding.

How Much Does a Reverse Mortgage Cost?

Reverse mortgages have closing costs just like traditional mortgages.

Depending on the program, costs may include:

• Origination charges
• Appraisal
• Title and escrow fees
• Recording charges
• Mortgage insurance on HECMs
• Other third-party closing costs

For HECMs, there are also ongoing costs such as interest and FHA mortgage insurance that may be added to the loan balance.

Some or all of the closing costs may be financed into the loan depending on the transaction.

That means you may not necessarily need to pay all of the costs out of pocket, but financing them reduces the amount of proceeds available and increases the loan balance.

Are Reverse Mortgage Proceeds Taxable?

Reverse mortgage proceeds are generally loan proceeds rather than income.

That is one reason they are treated differently from wages or retirement distributions.

However, everyone’s tax situation is different.

I am not a tax advisor.

If taxes are an important part of your decision, talk with a CPA or qualified tax professional before proceeding.

What Can You Use Reverse Mortgage Money For?

Generally, homeowners may use proceeds for a wide variety of purposes.

Examples include:

• Paying off an existing mortgage
• Home improvements
• Medical expenses
• Paying other debt
• Supplementing retirement income
• Building a cash reserve
• Helping with monthly expenses
• Purchasing another home
• Creating a line of credit for future needs

I do not think the question should simply be, “Can I get the money?”

The better question is:

What problem am I trying to solve with the home equity?

What Are the Advantages of a Reverse Mortgage?

Potential advantages may include:

• No required monthly principal and interest payment
• Access to home equity without selling
• Ability to remain in the home
• Different ways to receive proceeds
• Potential line-of-credit option
• Ability to pay off an existing mortgage
• HECM non-recourse protection
• Ability to purchase another home using a reverse mortgage

What Are the Disadvantages?

There are tradeoffs.

Potential disadvantages include:

• The loan balance increases over time
• Home equity generally decreases
• Closing costs can be significant
• Property taxes and insurance still have to be paid
• The home must generally remain your principal residence
• Less equity may eventually be left to heirs
• It may not make sense if you plan to move soon

That is why I do not think reverse mortgages should be sold as something that is right for everybody.

They are not.

Learn More About Reverse Mortgage Pros & Cons

Reverse Mortgage vs HELOC

A home equity line of credit and a reverse mortgage line of credit are very different.

With a traditional HELOC:

• Monthly payments are generally required
• Qualification may depend heavily on income and credit
• The lender may have the ability to reduce or freeze access under certain circumstances

With a HECM line of credit:

• Monthly principal and interest payments are not required
• Qualification is based on reverse mortgage guidelines
• Unused borrowing capacity can grow

Which one is better depends on the homeowner.

A strong borrower who does not mind monthly payments may prefer a HELOC.

Someone focused on retirement cash flow may prefer a reverse mortgage.

Should You Get a Reverse Mortgage?

That is the real question.

A reverse mortgage may make sense if:

• You plan to stay in the home
• You have significant equity
• You want to eliminate an existing mortgage payment
• You want access to home equity without selling
• You want a line of credit for retirement
• You understand that the balance will grow

It may not make sense if:

• You plan to move soon
• Leaving the maximum amount of equity to heirs is the top priority
• You cannot comfortably maintain property taxes and insurance
• You have another financing option that better fits your goals

I would rather explain both sides of the transaction than tell someone a reverse mortgage is automatically a good idea.

Why Work With a Reverse Mortgage Broker?

Reverse mortgage programs are not all identical.

That is especially true with proprietary products.

One lender may offer a program that another lender does not.

Different lenders may have different:

• Age requirements
• Loan amounts
• Property guidelines
• Credit requirements
• Line-of-credit options
• Jumbo programs

My job is to look at the homeowner’s situation and determine which options may make sense.

Sometimes the HECM is the best fit.

Sometimes a proprietary reverse mortgage makes more sense.

Sometimes the right answer is not a reverse mortgage at all.

What Information Do I Need to Get Started?

You do not need a full application just to have a conversation.

A good starting point is:

• Your age
• Spouse’s age, if applicable
• Approximate home value
• Existing mortgage balance
• Property type
• State
• What you are trying to accomplish

With that information, I can usually get a good idea of which programs may be worth reviewing.

Have Questions About a Reverse Mortgage?

If you are considering a reverse mortgage and want to understand what your options may look like, start with a conversation.

Tell me what you are trying to accomplish.

Maybe you want to eliminate an existing mortgage payment.

Maybe you want a line of credit.

Maybe you are trying to purchase another home.

Or maybe you just want to understand whether a reverse mortgage makes sense.

Call or text Shawn at (714) 271-8524 or email Info@TheBroker.Finance to discuss your reverse mortgage options.

Learn More About HECM Reverse Mortgages

Learn About Jumbo & Proprietary Reverse Mortgages

View Reverse Mortgage Requirements

Read Reverse Mortgage FAQs

Reverse mortgage availability and guidelines vary by program, lender, property, age, and state. HECM borrowers must meet FHA eligibility requirements and continue to meet loan obligations including property taxes, homeowners insurance, property maintenance, and principal-residence requirements.

Where I would put your internal links

I’d make this your main reverse-mortgage hub, so this page should probably have more internal links than most of your other pages. I’d use roughly 10–14 contextual internal links, primarily:

• How a Reverse Mortgage Works
• HECM Reverse Mortgage
• Reverse Mortgage Requirements
• Jumbo / Proprietary Reverse Mortgage
• Reverse Mortgage Line of Credit
• Reverse Mortgage Purchase
• Reverse Mortgage & Heirs
• Reverse Mortgage Pros & Cons
• Reverse Mortgage FAQs
• Contact

The bracketed calls-to-action in my draft are good places, but I’d also link naturally within the body. For example, the first occurrence of HECM reverse mortgage should link to your HECM page rather than waiting until the bottom.

External links I would use

I’d use only 2–4 external links, almost entirely to federal sources.

The strongest are:

• CFPB reverse mortgage overview from your early explanation of what a reverse mortgage is and how the balance grows. CFPB reverse mortgage overview
• CFPB borrower responsibilities from your taxes/insurance/property-maintenance section. CFPB borrower responsibilities
• CFPB heirs guidance from your heirs section. CFPB guidance for reverse mortgage heirs
• HUD-approved counseling information from the counseling section.

I would not link this hub page externally to reverse mortgage lenders or industry blogs. HUD/CFPB are stronger trust signals for this kind of page.