Reverse mortgages can be confusing because they work very differently from traditional mortgages.
A lot of homeowners have the same questions:
Do I still own the home?
What happens when I die?
Can I get one if I still have a mortgage?
How much can I borrow?
What if my spouse is younger?
What if I have bad credit?
Those are all reasonable questions.
The purpose of this page is to answer the most common reverse mortgage questions in plain English.
What Is a Reverse Mortgage?
A reverse mortgage is a loan that allows an eligible homeowner to access part of the equity in the home without making a required monthly principal and interest mortgage payment.
The homeowner still owns the property.
The lender does not take title to the home.
The borrower is still responsible for property taxes, homeowners insurance, maintenance, and other required property charges.
How Old Do You Have to Be for a Reverse Mortgage?
For a traditional FHA-insured HECM reverse mortgage, the borrower generally must be at least 62 years old.
There are also proprietary reverse mortgage programs that may be available to younger homeowners.
Depending on the lender and state, some proprietary programs may start as young as age 55.
Those programs are not FHA-insured HECMs and can have different guidelines.
Do I Still Own My Home?
Yes.
This is one of the biggest misconceptions about reverse mortgages.
The bank does not own your house.
You remain the owner of the property.
The reverse mortgage is simply a loan secured by the home.
Do I Have to Make Monthly Mortgage Payments?
A reverse mortgage generally does not require a monthly principal and interest mortgage payment.
However, that does not mean you have no housing expenses.
You are still responsible for:
- Property taxes
- Homeowners insurance
- Flood insurance if required
- HOA dues if applicable
- Maintenance
- Other required property charges
Those responsibilities continue for as long as you have the loan.
Can I Get a Reverse Mortgage If I Still Have a Mortgage?
Possibly.
You do not have to own the home free and clear.
In many cases, the existing mortgage is paid off as part of the reverse mortgage transaction.
Whether the numbers work depends on things such as:
- Age
- Home value
- Current mortgage balance
- Interest rates
- Program guidelines
If the existing mortgage balance is too high, the reverse mortgage may not provide enough proceeds to pay it off.
How Much Money Can I Get From a Reverse Mortgage?
There is no one percentage that applies to everybody.
The amount available depends on several factors, including:
- Age
- Home value
- Current interest rates
- Existing mortgage balance
- Type of reverse mortgage
- Program limits
- Property type
Older borrowers may generally qualify for a higher percentage than younger borrowers, all else being equal.
The only way to know what may be available is to look at the actual numbers.
What Is a HECM?
HECM stands for Home Equity Conversion Mortgage.
It is the FHA-insured reverse mortgage program.
It is the most common type of reverse mortgage.
A HECM generally starts at age 62 and follows FHA guidelines for borrower eligibility, property requirements, counseling, financial assessment, and loan structure.
[Learn More About HECM Reverse Mortgages]
What Is a Proprietary or Jumbo Reverse Mortgage?
A proprietary reverse mortgage is a private reverse mortgage program.
It is not FHA insured.
These programs may be useful for:
- High-value homes
- Borrowers younger than 62
- Larger loan amounts
- Certain property situations
- Borrowers who want different options than a HECM
Some proprietary programs may start at age 55 depending on the lender and state.
[Learn More About Jumbo / Proprietary Reverse Mortgages]
What Is a Reverse Mortgage Line of Credit?
A reverse mortgage line of credit allows the homeowner to leave part of the available proceeds unused and access those funds later.
This can be useful for:
- Emergencies
- Home repairs
- Medical expenses
- Retirement income
- Future care needs
- Unexpected expenses
A HECM line of credit works differently from a traditional HELOC.
One important feature is that unused borrowing capacity may grow over time.
[Learn More About a Reverse Mortgage Line of Credit]
Can I Use a Reverse Mortgage to Buy a Home?
Yes.
A reverse mortgage can be used to purchase a new primary residence.
With a HECM for Purchase, the borrower brings in part of the purchase price and the reverse mortgage provides the rest.
This can be useful for someone who wants to:
- Downsize
- Relocate
- Move closer to family
- Buy a lower-maintenance home
- Keep more cash available after selling another property
[Learn More About Reverse Mortgage Purchase Loans]
Can I Get a Reverse Mortgage With Bad Credit?
Possibly.
Reverse mortgage underwriting is different from traditional mortgage underwriting.
There is not simply one minimum credit score that determines everything.
The lender performs a financial assessment and may look at:
- Credit history
- Property tax history
- Homeowners insurance payment history
- Income
- Existing debt
- Residual income
- Overall ability to meet ongoing property expenses
A lower credit score does not automatically mean you cannot qualify.
Can I Get a Reverse Mortgage After Bankruptcy?
Possibly.
A previous bankruptcy does not automatically disqualify someone forever.
The lender may look at:
- Type of bankruptcy
- When it occurred
- Whether it was discharged
- Payment history afterward
- Overall financial situation
The details matter.
Do I Need Income to Qualify?
Yes, income can matter.
The lender wants to see whether you have enough resources to continue paying the ongoing costs of owning the home.
Income may include:
- Social Security
- Pension
- Retirement income
- Employment income
- Investment income
- Other qualifying income
The underwriting is different from a traditional mortgage, but the lender still needs to determine whether you can handle property taxes, insurance, and other required expenses.
Do I Need Good Credit?
Not necessarily.
Credit matters, but the purpose of the financial assessment is different from a conventional mortgage.
The lender is primarily trying to determine whether the borrower is likely to meet the ongoing obligations of the loan.
A lower score by itself does not always result in a decline.
What Is a Financial Assessment?
The financial assessment is part of the reverse mortgage underwriting process.
The lender reviews the borrower’s financial situation to determine whether the borrower appears able to continue paying:
- Property taxes
- Homeowners insurance
- Other required property charges
If the lender has concerns, a portion of the reverse mortgage proceeds may need to be set aside to pay future taxes and insurance.
What Is a LESA?
LESA stands for Life Expectancy Set-Aside.
If the financial assessment shows that the borrower may have difficulty keeping up with property taxes or homeowners insurance, the lender may require part of the available reverse mortgage proceeds to be reserved for those expenses.
That can reduce the amount of money available directly to the borrower.
Is Reverse Mortgage Counseling Required?
For a HECM, yes.
The borrower must complete counseling with a HUD-approved reverse mortgage counselor.
The counselor is independent from the lender.
The purpose is to explain:
- How the loan works
- Costs
- Responsibilities
- Alternatives
- When the loan becomes due
- How the loan may affect heirs
What Does a Reverse Mortgage Cost?
Reverse mortgages have closing costs just like other mortgages.
Costs may include:
- Origination fees
- Appraisal
- Title charges
- Recording fees
- Credit-related charges
- Mortgage insurance on HECMs
- Other third-party costs
Some or all of the costs may be financed into the loan, depending on the transaction.
Does Interest Accrue on a Reverse Mortgage?
Yes.
A reverse mortgage is not interest-free.
Because the borrower generally does not make a required monthly principal and interest payment, interest and certain charges are usually added to the loan balance over time.
That means the amount owed normally increases.
Can I Make Payments Anyway?
Yes.
Even though monthly principal and interest payments are generally not required, a borrower can usually make voluntary payments.
That may help reduce the loan balance or slow how quickly it grows.
Can I Pay Off a Reverse Mortgage Early?
Yes.
A reverse mortgage can generally be paid off at any time.
For example, you may decide to:
- Sell the home
- Refinance
- Pay off the loan with other funds
You are not required to keep the loan for life.
What Happens If I Sell the Home?
The reverse mortgage is paid off from the sale proceeds.
Any equity remaining after the loan balance and normal selling costs are paid belongs to you.
The lender does not get all of the sale proceeds just because there is a reverse mortgage.
What Happens When I Die?
When the last borrower dies, the reverse mortgage generally becomes due.
The heirs may have options.
They may be able to:
- Pay off the loan and keep the home
- Refinance the balance
- Sell the home
- Use another option available under the loan terms
A reverse mortgage does not automatically mean the bank gets the house.
[Learn More About Reverse Mortgages & Heirs]
Can My Children Keep the Home?
Possibly.
If your heirs want to keep the property, they generally need to satisfy the reverse mortgage balance according to the applicable loan rules.
That may mean paying off the balance with cash or refinancing it into another loan.
What If the Loan Balance Is More Than the Home Is Worth?
With an FHA-insured HECM, the loan is non-recourse.
That means the borrower or heirs are generally not personally responsible for paying more than the applicable amount tied to the home’s value under program rules.
That protection can be important if the loan balance grows beyond the property value.
Does a Reverse Mortgage Reduce My Children’s Inheritance?
It can.
A reverse mortgage uses home equity.
The loan balance usually grows over time.
That means there may be less equity left for heirs.
How much remains depends on:
- How much was borrowed
- How long the loan was in place
- Interest rates
- Home appreciation
- Property value
- Costs
- How much of the available proceeds were used
What Happens If My Spouse Is Younger Than 62?
That depends on the situation.
A younger spouse may be treated as an eligible non-borrowing spouse under certain HECM rules.
There may be protections that allow the younger spouse to remain in the home after the borrowing spouse dies, as long as certain requirements are met.
A younger spouse can also affect the amount available.
This is something that should be discussed before the loan is set up.
Can I Get a Reverse Mortgage If I Am 55?
Not through a traditional HECM.
HECM generally starts at age 62.
However, some proprietary reverse mortgage programs may be available starting at age 55, depending on the state and lender.
What Property Types Can Qualify?
Depending on the program, eligible properties may include:
- Single-family homes
- Certain two-to-four-unit properties
- Condominiums
- Townhomes
- Certain manufactured homes
Property eligibility can be more complicated with condos and manufactured homes.
Can a Condo Qualify?
Possibly.
Some condos qualify for HECM financing if they meet FHA requirements.
Certain proprietary reverse mortgage programs may have different condo guidelines.
Not every condo project will qualify.
Can a Manufactured Home Qualify?
Possibly.
Manufactured homes may qualify if they meet specific program requirements.
Things such as:
- Age of the home
- Foundation
- Title
- Land ownership
- Property classification
can all matter.
Can I Use a Reverse Mortgage on a Vacation Home?
A HECM generally requires the home to be your primary residence.
A vacation home or investment property normally would not qualify for a HECM.
Can I Rent Out Part of the Property?
Possibly.
Certain two-to-four-unit properties may qualify if the borrower occupies one unit as the principal residence.
The exact property and occupancy rules need to be reviewed.
Can I Move Out of the Home?
A reverse mortgage generally requires the property to remain the borrower’s principal residence.
If the borrower permanently moves out, the loan may become due.
Temporary absences can be treated differently.
What Happens If I Move Into Assisted Living?
If the move becomes permanent and the home is no longer your principal residence, the reverse mortgage may eventually become due.
The timing and rules depend on the loan and circumstances.
This is something families should consider when discussing long-term care plans.
Can I Use Reverse Mortgage Money for Anything I Want?
Generally, reverse mortgage proceeds can be used for many personal purposes.
Common uses include:
- Paying off an existing mortgage
- Home repairs
- Medical expenses
- Retirement income
- Travel
- Helping family
- Paying off other debt
- Emergency savings
The important thing is understanding that every dollar borrowed increases the loan balance.
Are Reverse Mortgage Proceeds Taxable?
Reverse mortgage proceeds are generally loan proceeds rather than earned income.
They are typically not treated as taxable income.
However, individual tax situations can be different, so tax questions should be discussed with a qualified tax professional.
Does a Reverse Mortgage Affect Social Security?
Loan proceeds generally do not affect regular Social Security retirement benefits in the same way earned income might.
However, need-based government benefits can have different rules.
Anyone receiving means-tested benefits should check how keeping reverse mortgage proceeds in an account could affect eligibility.
Is a Reverse Mortgage Better Than a HELOC?
Not necessarily.
A HELOC may have lower upfront costs and can be a good option for someone with strong income and credit who is comfortable making monthly payments.
A reverse mortgage may make more sense for someone who wants access to home equity without a required monthly principal and interest mortgage payment.
The better option depends on:
- Age
- Income
- Credit
- Home value
- Mortgage balance
- Monthly cash flow
- Long-term plans
What Are the Biggest Advantages of a Reverse Mortgage?
Possible advantages include:
- No required monthly principal and interest mortgage payment
- Access to home equity without selling
- You remain the owner of the home
- Potential line of credit
- Improved monthly cash flow
- Ability to purchase another home
- HECM non-recourse protection
What Are the Biggest Disadvantages?
Possible disadvantages include:
- Loan balance increases over time
- Home equity may decrease
- Closing costs
- Less equity may remain for heirs
- Taxes and insurance still have to be paid
- Home must remain the principal residence
- It may not make sense if you plan to move soon
[Learn More About Reverse Mortgage Pros & Cons]
Is a Reverse Mortgage a Good Idea?
Sometimes.
Sometimes not.
I do not believe a reverse mortgage should be judged by whether someone qualifies.
The better question is:
Does it improve the homeowner’s financial situation?
For one homeowner, eliminating a $2,000 monthly mortgage payment could make a major difference.
For another, selling the home or getting a HELOC may make more sense.
The answer depends on the goal.
How Do I Know Which Reverse Mortgage Program Is Best?
Start with the basic facts:
- Age
- Home value
- Existing mortgage balance
- Property type
- State
- What you are trying to accomplish
From there, different options can be compared.
That may include:
- HECM
- HECM line of credit
- HECM for Purchase
- Jumbo/proprietary reverse mortgage
- Other alternatives
What Information Do I Need to Get Started?
You do not need a pile of documents before asking questions.
A good starting point is:
- Age of the youngest borrower
- Approximate home value
- Approximate mortgage balance
- Property type
- State
- Main financial goal
That is usually enough to start looking at whether a reverse mortgage may make sense.
Still Have a Reverse Mortgage Question?
If you do not see your question here, that is fine.
Every homeowner’s situation is different.
Maybe your spouse is younger.
Maybe you still have a large mortgage.
Maybe you have credit issues.
Maybe you own a condo, manufactured home, or high-value property.
Or maybe you are simply trying to decide whether a reverse mortgage is a good idea.
Tell me what your situation looks like and what you are trying to accomplish.
From there, I can help you understand what options may be worth exploring.
Call or text Shawn at (714) 271-8524 or email Info@TheBroker.Finance to discuss your reverse mortgage questions.
[Learn How a Reverse Mortgage Works]
[Learn More About Reverse Mortgage Requirements]
[Contact Shawn]
This information is for educational purposes only and is not a commitment to lend. Reverse mortgage eligibility, proceeds, rates, costs, property requirements, servicing rules, and program guidelines vary based on the borrower, property, lender, state, and current program requirements.