Reverse Home Mortgage
Expert guidance from The Home Loan Team
What Is a Reverse Mortgage?
A reverse mortgage allows a homeowner to convert part of their home equity into cash, without having to make monthly mortgage payments. The loan becomes due only when you sell the home, permanently move out, or fail to maintain the home.
With a reverse mortgage:
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You keep the title and ownership of your home.
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The interest accrues and is added to the loan balance (you don’t pay it monthly).
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The proceeds can be used for many purposes—living expenses, paying off existing debt, healthcare, or home upgrades.
How to Qualify for a Reverse Mortgage
To be eligible, borrowers typically must meet the following:
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Be age 62 or older (primary homeowner).
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Live in the property as your primary residence.
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Own the home outright or have a single mortgage lien (which the reverse mortgage can pay off).
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Stay current on property taxes, homeowner’s insurance, HOA dues, and maintain the home.
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Attend a HUD-approved counseling session about reverse mortgage rules and implications.
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The home must meet property eligibility rules: single-family, up to 4 units, condominiums, townhomes, or manufactured homes built after 1976.
Types of Reverse Mortgages
Your Home Loan Team should be ready to explain the three main varieties:
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Home Equity Conversion Mortgage (HECM) — The most common, federally insured option via HUD. Funds may be used for any purpose, though upfront costs can be higher.
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Proprietary Reverse Mortgages — Private, non-government options. Often more flexible and better for high-value homes.
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Single-Purpose Reverse Mortgages — Offered by nonprofits or local agencies for a specific purpose, such as home repairs. These are less common.
Ways to Receive Funds
Reverse mortgages offer multiple payout options:
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Lump Sum — receive all proceeds at once (this is the only option with a fixed rate)
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Tenure (Equal Monthly Payments) — monthly payments for as long as at least one borrower lives in the home
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Term Payments — fixed monthly payments over a defined period (e.g. 10 years)
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Line of Credit — draw funds as needed; you pay interest only on what you draw
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Combination — mixes monthly payments + line of credit or term + line of credit
Benefits of a Reverse Mortgage
This option provides several advantages, especially for older homeowners:
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No monthly mortgage payments required (as long as you comply with property obligations)
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Access to home equity for living expenses, healthcare, or debt relief
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Flexibility in how you receive proceeds, according to your needs
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Non-borrowing spouse protections—some programs allow a spouse to remain in the home after borrower’s death (depending on terms)
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Can prevent foreclosure by paying off an existing mortgage using reverse mortgage funds
The Reverse Mortgage Process
Here’s how the typical journey works:
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Counseling & eligibility review — complete reverse mortgage counseling with a HUD-approved counselor
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Apply & document — supply financial documents, home title, proof of obligations, etc.
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Appraisal & underwriting — the lender will appraise your home to determine its value and possible loan amounts
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Closing & rescission period — after closing, you have 3 business days to cancel without penalty; if canceled, fees must be refunded within 20 days
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Receive proceeds & loan accrual — you choose how to receive funds; interest accrues and is added to the balance
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Loan becomes due — when you sell, move permanently, or fail to maintain qualifying conditions (taxes, insurance, etc.)
Frequently Asked Questions
- How much can I borrow?
- Can I make payments if I choose?
- When must the reverse mortgage be repaid?
- What if my credit is low?
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The amount depends on the youngest borrower’s age and the home’s appraised value. Typically, LTV (loan-to-value) falls between 40 % and 70 % of the home value.
Yes. While monthly payments are not required, you may make full or partial prepayments anytime. There’s no penalty. However, if your loan is fixed-rate and you prepay, you generally can’t re-borrow those funds later.
The loan becomes due when:
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The homeowner moves permanently out of the home
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The home is sold
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The homeowner fails to maintain property obligations or abandonment
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The last surviving borrower dies
At that point, heirs may have 6 to 12 months to repay, refinance, or sell the home.
Improve your credit by making on-time payments, reducing debt, and avoiding excessive new credit inquiries.
Is a Reverse Mortgage Right for You?
A reverse mortgage can be a powerful tool to tap into home equity while remaining in your home, especially for retirees who need income or flexibility. It’s especially beneficial when:
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You’re age 62 or older
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You own your home (or nearly own it)
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You want to cover living, medical, or lifestyle costs
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You prefer not to move or sell your home
However, it’s not ideal if you can’t maintain property taxes, insurance, or upkeep. The loan also reduces equity your heirs might inherit. The costs (upfront and accrual) can be significant. It’s essential to evaluate carefully and compare alternatives.
Next Steps
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Schedule a session with a HUD-approved counselor
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Review your credit report, assets, and income
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Appraise your home’s value
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Evaluate your long-term plans (how long you intend to stay, your estate plans)
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Contact your Home Loan Team for a reverse mortgage consultation & run side-by-side comparisons
Ready to explore? Our Home Loan Team can walk you through reverse mortgage scenarios, show you cost implications, and help you decide if it aligns with your goals.
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