How do you qualify for a reverse mortgage loan?
My goal is that you become fully informed about this versatile loan and make the right call for you and your family. Here's everything you need to know to get started.
The basics
Deciding on one of the biggest financial moves of your life can feel scary. That's why real education and expert advice matter. My goal is that as you read through this page, you get a clear picture of what a reverse mortgage actually is, how it works, and whether it makes sense for you.
A reverse mortgage is a unique loan that allows homeowners 62 and older to draw on the value of their home. You can receive the money in a variety of payout options, or use it as a line of credit. What makes it different from any other mortgage is that repayment isn't required until the homeowner no longer lives in the residence, the last surviving borrower passes away, or the loan obligations aren't met. Those obligations include paying your property taxes, keeping insurance in force, and maintaining the property to FHA guidelines if it's a HECM loan.
Reverse mortgages explained simply
A short, plain English overview of how a reverse mortgage actually works. No jargon, no fluff.
Types of reverse mortgage loans
There are a few different types of reverse mortgages, but the two most common are the HECM loan (Home Equity Conversion Mortgage, insured by the FHA) and jumbo or proprietary reverse mortgages1 for higher value homes.
As a reverse mortgage specialist, I'm here to help you explore your options and figure out whether a reverse mortgage is actually right for you. I aim to give world class service from the first call through closing.
HECM Loans
The Home Equity Conversion Mortgage. FHA insured, government backed, and the most common reverse mortgage for homeowners 62 and older.
Learn more →Jumbo Reverse Mortgages
For higher value homes, with loan amounts available up to $4,000,000 for those who qualify. Not FHA insured. Terms vary by lender.
Learn more →Qualifications for a reverse mortgage loan
The basic requirements are simpler than you'd think. Here's what it comes down to:
- At least one borrower on title must be at least 62 years old.
- The home must be your primary residence for at least 6 months out of every year.
- You need sufficient equity. There's no exact number, but as a rule you'd want at least 50% equity since the proceeds pay off your existing mortgage first.
- HECM underwriting is unique. Applicants go through a financial assessment to confirm they can meet the loan obligations, like paying taxes and insurance.
Good news: you do not need to pay off your home to qualify. The cash you can access is based on the age of the youngest borrower, the current expected interest rate, the payout option you choose, and the appraised value of the home. As a rule, an older borrower with a higher value home typically qualifies for more than a younger borrower with the same home value at the same interest rate. There are also limits on how much you can access in the first year. For details, check the FAQs page.
Curious what you could actually qualify for?
Get an EstimateThe key features of a reverse mortgage
Deciding whether a reverse mortgage is right for you can feel daunting. Here are the features that set it apart from a traditional mortgage.
No required monthly mortgage payment
You still pay property taxes and insurance, and you keep the home in good shape. But no monthly principal and interest payment is required.
Multiple ways to tap your equity
Choose monthly payments, a lump sum, or a growing line of credit. Match the payout to your actual financial goals.
Proceeds are typically tax free
The money you receive is generally not taxed as income. Always talk to your tax advisor for how it applies to your specific situation.
Built in borrower protections
Rules that reduce the risk of foreclosure, including a limit on year one draws. A non borrowing spouse under 62 can also remain in the home if the borrower passes, as long as loan terms are met.
Line of credit that grows over time
Interest only accrues on funds you actually draw. Unused funds grow at the same rate as your loan, so your access to cash can grow as you age.
Non recourse loan
If your home sells for less than the loan balance, your heirs are not liable for the difference. Only the sale proceeds are used to repay the loan.
At the time of application, your existing mortgage balance doesn't have to be paid off to qualify. But the reverse mortgage proceeds have to be used to pay off any existing mortgage or liens first. You continue to hold title to your home, subject to the mortgage securing the reverse mortgage loan.
What kinds of homes qualify?
A lot of properties are eligible for a reverse mortgage. Here's what typically qualifies:
- Single family homes and detached homes
- Townhouses
- 2 to 4 unit properties that are owner occupied
- Condominiums that are FHA approved for the HECM
- Some manufactured homes (give me a call for the specifics)
What happens to your home and your heirs
This is where most people have the most questions. Click any one below to expand the answer.
No. With a HECM, as long as one of the borrowers (or an original non borrowing spouse) still lives in the home, keeps paying taxes and insurance, maintains the home, and complies with the loan terms, you don't have to repay the loan. Once the last surviving borrower passes away, the home is sold, or the loan obligations aren't met, that's when the loan comes due.
Once the last surviving borrower passes away, sells the home, or no longer lives there as their primary residence, you or your estate is responsible for repaying the money received from the loan, plus interest and fees. Any remaining equity belongs to you or your heirs.
A "non recourse" clause protects you and your estate from being responsible for more than the value of the home when the loan is repaid. If the loan balance ends up higher than the home's value, your heirs can sign a deed in lieu of foreclosure and release the property, or they can pay 95% of the home's appraised value less customary closing costs and real estate commissions.
HUD advises against using any service that charges a fee (other than the required HECM counseling) or asks for a lender referral fee to get a reverse mortgage. HUD provides this information for free and can point you to HUD approved counseling agencies at little or no cost.
Counseling fees typically run $125 to $150, and some agencies waive the fee for qualified applicants. You can find a HUD approved housing counseling agency near you by calling 1-800-569-4287.
Five ways to receive your loan proceeds
Adjustable rate reverse mortgages give you five different ways to receive the money. Pick whichever fits your life best.
Tenure
Equal monthly payments for as long as you live in the home.
Term
Equal monthly payments for a fixed number of months you choose.
Line of Credit
Draw funds in installments, whenever and however you want.
Modified Tenure
Monthly payments combined with a line of credit.
Modified Term
Monthly payments for a fixed period combined with a line of credit.2
How is it different from a home equity line of credit?
The two loans look similar on the surface but work very differently. Here's the side by side:
How reverse mortgages came to be
The origins of the reverse mortgage go back further than most people think. The very first one was written in 1961 by Nelson Haynes at Deering Savings & Loan in Portland, Maine. He created it to help Nellie Young, the widow of his high school football coach, stay in her home after losing her husband's income.
The concept grew through the 1970s as private banks offered similar loans, but they lacked the FHA protections we have today. In 1969, the first Senate hearing was held on the topic. Nearly two decades later, in 1987, Congress formalized the Home Equity Conversion Mortgage as part of an insurance bill. It started as a pilot for the nation's first federally insured reverse mortgage and later became a permanent fixture in mortgage lending.
President Ronald Reagan signed the FHA Reverse Mortgage bill into law on February 5, 1988. The first FHA insured HECM was made in 1989 to Marjorie Mason of Fairway, Kansas by the James B. Nutter Co. Since then, reverse mortgages have grown steadily as a safe, government insured way for seniors to tap into their home equity without a monthly mortgage payment.3
Today, most people use "reverse mortgage" and "HECM" interchangeably. They're technically not the same thing (only the HECM is FHA insured), but the name stuck because payments are "reversed": the borrower doesn't pay the lender; the lender pays the homeowner.
Still have questions?
Get in touch and I'll walk you through your options directly. No pressure, no obligation.
1 For these loan programs I am a mortgage broker only, not a mortgage lender or mortgage correspondent lender. I will arrange loans with third-party providers but do not make loans for these programs. I will not make mortgage loan commitments or fund mortgage loans under these programs.
2 HECM fixed interest rate mortgages are limited to the Single Disbursement Lump Sum payment option, which is one full draw at loan closing with no future draws. Adjustable interest rate mortgages provide five flexible payment options and allow future draws. Initial distribution caps will apply.
3 There are some circumstances that will cause the loan to mature and the balance to become due and payable. The borrower is still responsible for paying property taxes, homeowner's insurance, and maintaining the property to HUD standards. Failure to do so could make the loan due and payable. Credit is subject to age, income standards, credit history, and property qualifications. Program rates, fees, terms, and conditions are not available in all states and subject to change.
*Borrowers must continue to pay property taxes, homeowner's insurance, and home maintenance costs.
This advertisement does not constitute financial advice. Please consult a financial advisor regarding your specific situation. Borrowers should seek professional tax advice regarding reverse mortgage loan proceeds.