quick contact
Get in touch
A reverse mortgage allows older homeowners to convert a portion of their home equity into cash while continuing to live in their home. Instead of making monthly mortgage payments to a lender, the lender makes payments to the homeowner based on the equity in the property.
Reverse mortgages are typically available to homeowners age 62 and older who have significant equity in their home. The most common type of reverse mortgage is the Home Equity Conversion Mortgage (HECM), which is insured by the Federal Housing Administration.
Borrowers can receive funds as a lump sum, a line of credit, monthly payments, or a combination of these options. The loan is generally repaid when the homeowner sells the property, moves out of the home, or passes away.
What Is the 60% Rule?
During the first year of an FHA-insured reverse mortgage, borrowers are generally limited to accessing 60% of the available loan proceeds. However, borrowers may access additional funds if necessary to pay off an existing mortgage or certain mandatory obligations.
Can You Lose Your Home With a Reverse Mortgage?
Borrowers must continue to meet several responsibilities while holding a reverse mortgage. These include paying property taxes, maintaining homeowners insurance, and keeping the home in good condition. Failure to meet these obligations could result in foreclosure.
Can Reverse Mortgage Funds Be Used for Any Purpose?
In most cases, funds from a reverse mortgage can be used for a wide variety of purposes, such as paying off existing debt, covering medical expenses, building a financial reserve, or making home improvements.
Are There Alternatives to a Reverse Mortgage?
Some homeowners may choose to access home equity through other options such as a home equity loan, a home equity line of credit (HELOC), or a cash-out refinance. These alternatives may have different credit and income requirements.
Can You Have More Than One Reverse Mortgage?
A homeowner may only have one active reverse mortgage at a time. However, after the existing reverse mortgage is repaid, it may be possible to qualify for another reverse mortgage in the future.
Like any mortgage program, reverse mortgages come with both advantages and important considerations. Reviewing both sides can help determine whether this type of loan aligns with your financial goals.
Flexible Use of Funds
Reverse mortgage proceeds can be used in many ways depending on your needs. Homeowners often use the funds to supplement retirement income, pay for home improvements, eliminate existing debt, or create additional financial reserves.
Flexible Qualification Guidelines
Reverse mortgages generally have fewer qualification requirements than many traditional mortgage programs. While lenders may review credit history for major issues, there are typically no minimum credit score or income requirements.
Remain in Your Home
A reverse mortgage allows homeowners to access the equity in their property while continuing to live in the home. Monthly mortgage payments are not required as long as the borrower continues to meet the program obligations.
Age Requirement
Reverse mortgages are designed for older homeowners. For the most common program, the Home Equity Conversion Mortgage (HECM), borrowers must be at least 62 years old.
Interest Rates and Fees
Reverse mortgages can involve higher interest rates and additional costs compared to traditional mortgages. These costs may include closing costs, loan servicing fees, mortgage insurance premiums, and required counseling fees.
Impact on Estate Planning
Although homeowners retain ownership of the property, the loan balance must be repaid when the home is sold, the borrower moves out, or the borrower passes away. If heirs wish to keep the home, they will need to repay the reverse mortgage balance.
Reverse mortgages are designed for older homeowners who have built equity in their property. To qualify for the most common reverse mortgage program—the Home Equity Conversion Mortgage (HECM)—borrowers must meet several eligibility requirements.
Age Requirement
The homeowner must be at least 62 years old to qualify for a HECM reverse mortgage.
Primary Residence
The property must be the borrower’s primary residence. Reverse mortgages are not available for second homes or investment properties.
Property Payment History
Borrowers must demonstrate a strong history of paying property-related expenses. This typically means no late payments during the past 24 months for obligations such as:
• mortgage payments
• property taxes
• homeowners insurance
Financial Counseling
Applicants are required to complete a counseling session with a government-approved housing counselor. This session ensures that borrowers fully understand how reverse mortgages work and the responsibilities associated with the loan.
Credit Review
While lenders review credit history to identify major delinquencies or financial concerns, reverse mortgages generally do not require a minimum credit score.
Income Requirements
Unlike many traditional mortgage programs, reverse mortgages typically do not require borrowers to meet specific income qualifications.
