Reverse Mortgage Information Center

No, you need not be debt free to secure a reverse mortgage loan.  As long as you have a considerable amount of equity in your home, you can qualify for a reverse mortgage.  However, any outstanding mortgage on the home must be paid off from the proceeds of the reverse mortgage.

Reverse mortgage proceeds can be in received in 3 ways: as a lump sum amount up front, as a monthly payment, a line of credit, or as any combination of the 3.  The most popular method for seniors is a line of credit account which gives seniors access to the funds when they need it.

To qualify for a reverse mortgage, the youngest homeowner must be at least 62 years old.  The property must be owned outright or have an existing mortgage balance that can be paid off from the reverse mortgage proceeds.  On average, lenders require homeowners to own around 50% of the equity in their home or more.  There are no income or credit requirements when taking out a reverse mortgage.

When the last homeowner passes away or moves out, the reverse mortgage loan balance will be due.  The heirs must then decide whether they want to keep the property or not.  If they decide not to keep the property, they can sell the home and repay the loan balance from the proceeds. If the home value is greater than the loan balance, the heirs will be able to keep the proceeds.  If the home value is less than the loan balance, the heirs will only be responsible for what the home is worth.  Other assets will not be impacted and cannot be collected by the lender.  The heirs can also decide to keep the home by paying off the reverse mortgage balance with cash or through refinancing.  In this case, they are responsible for the full amount of the outstanding loan.

If you are considering a reverse mortgage and want to know how much you can borrow, it is always best to check with your lender. The amount you can borrow is dependent on your home value, your age, the current interest rate, and any applicable loan limits.  Typically, you can borrow more the higher the home value, the lower the interest rate, and the older you are.

TALC is the "Total Annual Loan Cost" of a reverse mortgage. It takes all of your reverse mortgage costs and reflects them in a single annual rate, which makes TALC extremely helpful in comparing reverse mortgages against each other.

One of the requirements of a reverse mortgage is that the homeowner must reside in the home as their primary residence.  If you have to move into an assisted living facility or home for more than 12 consecutive months, the loan will be due and you will need to repay the loan balance.

If the homeowner lives longer than expected, the lender cannot force the homeowner to sell the home and repay the loan.  More importantly, if the homeowner has opted for monthly lifetime income, the lender must continue to pay the homeowner each month even if the loan balance exceeds the home’s market value.  With a HECM loan, one will never need to repay more than the home is worth. The only time the loan balance needs to be repaid is when the last homeowner passes away or moves.

If the home value declines after taking out the loan, the homeowner will still continue to receive the funds initially agreed upon.

The youngest homeowner must be at least 62 years old to qualify for a reverse mortgage.  If the children on the title are younger than 62 years old, one cannot take out a reverse mortgage.  It is still possible to secure a reverse mortgage if the title is in a living trust.  The lender will need to review the trust and approve it and it’s best to inform the lender of the situation as early as possible to avoid any issues later in the process.

A reverse mortgage is for homeowners facing retirement who want to borrow money against the equity in their home and receive cash in tax-free payments. A reverse mortgage is different from other types of loans because repayment, including accrued interest, is not required until the homeowner passes away or decides to sell the home.  The only payments you have to make are property taxes, home insurance, and the cost of maintaining your home.  To get a reverse mortgage, you have to be over the age of 62, and usually there can be no existing liens against the home. Check with your lender for specific terms.

A reverse mortgage is payable only when the homeowner(s) move or pass away.  A reverse mortgage can be paid off with the proceeds from selling the property or by refinancing the loan with a traditional mortgage.

A reverse mortgage will not impact Social Security and Medicare benefits because income is not currently a factor considered in qualification for those two programs. 

A reverse mortgage may affect Medicaid benefits because Medicaid is only available to those with limited income.  Additional income from a reverse mortgage may push one over the income limit and disqualify one from the Medicaid program.  Eligibility varies by state, so please contact your state’s Medicaid office for more information.

No, a lender will never take the title to the home.  The homeowner will always retain the title to the home until the homeowner(s) move out or pass away.  Once the last remaining homeowner passes away, the title is passed on to the heirs. The loan must be repaid once this happens but the loan can never grow larger than the value of the home.

Home equity is calculated by subtracting the amount owed on any mortgage loan(s) from the fair market value of the property. Equity can be expressed in dollars or in percentage form. For instance a homeowner with a house worth $200,000 with a loan balance of $150,000 can be said to have an equity stake of $50,000 or a 25% equity stake.

A reverse mortgage that is insured by the Federal government and backed by the US Department of Housing and Urban Development (HUD).

A HECM option that provides access to a set amount of cash whenever needed.  Interest is only paid on any cash that has been drawn against the line of credit account.

A single payment made to the borrower after the closing of a reverse mortgage loan.

The mortgage insurance premium is a fee included in a HECM mortgage that ensures you will receive your loan proceeds even if your lender goes out of business.  It also ensures that you will never owe your lender more than your property is worth.

The lender in a mortgage agreement.

The borrower in a mortgage agreement.

The net principal limit is the amount of money available to the borrower of a reverse mortgage.  The net principal limit is equal to the principal limit less the reverse mortgage origination fee, any outstanding mortgage balance, the servicing fee, and monthly insurance premium fee.

The principal limit is the amount of money available to a borrower before any fees or financing cost.  The limit is determined by the maximum claim amount, age of the youngest borrower, and the current interest rate.

A reverse mortgage that is not federally insured by HUD, but allows you to borrow more money than a HECM mortgage.

A legal document in which one person releases his or her interest in a property and passes the interest in the property to another person. A quitclaim deed does not make any guarantee of clear title.

A reverse mortgage that is only available in some states and can only be used for one purpose such as remodeling, paying off existing mortgage, or paying off taxes.

A HECM option that pays you a set monthly amount for as long as you live in your home.

A HECM option that’s pays you a set monthly amount over a certain period of time.

A legal document offered by the seller  of a property to the buyer that guarantees that the seller is the actual owner of the property, possesses the right to sell the property, that the title is clear on the property, and that there are no claims against the property.