Reverse Mortgages FAQs

Reverse Mortgage Frequently Asked Questions

Answers to Common Questions About Reverse Mortgages

Reverse mortgages work differently from traditional home loans, so it's natural to have questions. Here are answers to some of the questions homeowners and their families ask most often.

The Basics

What is a reverse mortgage?
A reverse mortgage is a home loan that allows eligible homeowners to access a portion of their home equity without selling the home. Unlike a traditional mortgage, required monthly principal-and-interest payments generally aren't required while the borrower continues to meet the loan requirements.

Do I still own my home?
Yes. You retain title and ownership of your home. The reverse mortgage is a loan secured by the property.

Does the bank own my home?
No. The lender does not take ownership of your home simply because you have a reverse mortgage.

Do I have to make monthly mortgage payments?
With a traditional reverse mortgage, required monthly principal-and-interest payments generally aren't required while the loan remains in good standing. However, you remain responsible for property taxes, homeowners insurance, applicable property charges, and maintaining the home.

A reverse second mortgage is different because an existing first mortgage remains in place and its required monthly payments must continue.

How old do I have to be?
For an FHA-insured HECM, the minimum borrower age is generally 62. Some proprietary reverse mortgage programs may be available beginning at age 55, depending on the lender, program, property, and state.

Can I get a reverse mortgage if I already have a mortgage?
Possibly. With a traditional reverse mortgage, the existing mortgage generally must be paid off at closing using reverse mortgage proceeds and/or other available funds.

A reverse second mortgage may allow an eligible first mortgage to remain in place, subject to the program requirements.

How much money can I receive?
The amount depends on the reverse mortgage program and factors that may include your age, home value, existing mortgage balance, interest rates, property, and available equity.

Receiving & Using Reverse Mortgage Proceeds

How can I receive the money from a reverse mortgage?
Depending on the loan program and whether the reverse mortgage has a fixed or adjustable interest rate, available proceeds may be received in different ways, including:

• Lump-sum proceeds

• Line of credit

• Monthly advances

• A combination of available options

Not every option is available with every reverse mortgage program.

What can I use the money for?
Reverse mortgage proceeds generally can be used for many purposes, such as:

• Paying off an existing mortgage

• Supplementing retirement income

• Home repairs or improvements

• Medical or healthcare expenses

• Paying other debts

• Creating a financial reserve

• Helping with everyday living expenses

• Other personal financial needs

Do I have to take all of the money at once?
Not necessarily. Certain reverse mortgage programs allow proceeds to remain available through a line of credit or to be received over time.

How does a HECM line of credit work?
With an eligible adjustable-rate HECM, available proceeds may be placed in a line of credit that can be accessed as needed, subject to the available balance and loan requirements.

Does the unused HECM line of credit grow?
Yes. Unused borrowing capacity in a HECM line of credit can increase over time according to the program's applicable growth calculation.

It is important to understand that this isn't interest earned on money in a savings account. It is an increase in available borrowing capacity under the reverse mortgage.

Do I have to use the line of credit?
No. You generally aren't required to draw available HECM line-of-credit funds simply because they're available.

Can I use a reverse mortgage to buy another home?
Yes. A Reverse for Purchase can allow an eligible homeowner to purchase a new principal residence by combining their own funds with reverse mortgage proceeds.

Costs, Taxes, Insurance & Homeowner Responsibilities

What costs are associated with a reverse mortgage?
Reverse mortgages can include costs such as lender fees, appraisal and other third-party charges, title and closing costs, and applicable mortgage insurance or program fees. Costs vary depending on the loan and program.

Do I still have to pay property taxes and homeowners insurance?
Yes. The homeowner remains responsible for paying property taxes, homeowners insurance, and other applicable property charges.

What about HOA or condominium fees?
Those remain the homeowner's responsibility. Having a reverse mortgage does not eliminate HOA or condominium association obligations.

Do I have to maintain the home?
Yes. The property must be maintained in accordance with the requirements of the reverse mortgage.

What is a LESA?
A Life Expectancy Set-Aside (LESA) may be required with a HECM based on the lender's financial assessment. Funds are set aside from the reverse mortgage proceeds to help pay certain property charges, generally property taxes and homeowners insurance.

Does a LESA pay my HOA fees?
Generally, no. HOA or condominium fees remain the homeowner's responsibility.

Will I have to qualify financially for a reverse mortgage?
Yes. Reverse mortgages aren't simply based on age and home equity. For a HECM, the lender performs a financial assessment that considers factors such as income, expenses, assets, credit history, and the borrower's ability and willingness to meet ongoing property obligations.

Does the reverse mortgage balance increase?
Generally, yes. Because required monthly principal-and-interest payments generally aren't made on a traditional reverse mortgage, interest and applicable charges are added to the loan balance over time.

Can I make payments on a reverse mortgage if I want to?
Generally, yes. A borrower can typically make voluntary payments toward the reverse mortgage balance without being required to make regular monthly principal-and-interest payments. The specific loan terms should always be reviewed.

What Happens When I Leave the Home or Die?

When does a reverse mortgage become due?
A reverse mortgage generally becomes due and payable after certain events, such as when the last borrower:

• Sells the home

• Permanently moves out

• No longer occupies the property as a principal residence

• Dies

The loan may also become due if required loan obligations aren't met, such as paying property taxes and insurance or maintaining the property.

What happens if I move into assisted living or long-term care?
A temporary absence doesn't necessarily cause the loan to become due. However, HECM occupancy rules apply if the borrower is away from the home for an extended period, including an absence for medical reasons.

If a permanent move to assisted living, memory care, or another long-term-care setting is being considered, it's important to review the reverse mortgage and occupancy requirements as part of the transition planning.

What happens to my home when I die?
The home remains part of your estate. The reverse mortgage does not automatically give the lender ownership of the property.

When the loan becomes due, the heirs or estate generally must address the outstanding reverse mortgage balance.

Can my heirs keep the home?
Yes. Heirs may generally keep the home by satisfying the amount required under the applicable reverse mortgage rules, potentially using their own funds or obtaining new financing.

Can my heirs sell the home?
Yes. The home can generally be sold, the reverse mortgage and other applicable liens can be paid from the sale proceeds, and any remaining equity belongs to the estate or other entitled parties.

What if the reverse mortgage balance is more than the home is worth?
HECM reverse mortgages are non-recourse loans. Generally, neither the borrower nor the estate is personally responsible for a deficiency solely because the loan balance exceeds the home's value, subject to FHA program requirements.

Will my children inherit the debt?
They don't simply inherit a personal obligation to make the reverse mortgage payments. However, if they want to retain the property, the reverse mortgage must be resolved according to the applicable loan and program requirements.

Planning Ahead Helps

It's a good idea for borrowers to discuss their plans with their family or heirs so everyone understands what happens to the home and the reverse mortgage in the future.

Counseling & Choosing the Right Reverse Mortgage

Is counseling required for a reverse mortgage?
For an FHA-insured HECM, borrowers must complete counseling with an independent HUD-approved HECM counselor before the loan can proceed. Proprietary reverse mortgage programs may have different counseling requirements.

Why is HECM counseling required?
Counseling helps ensure that borrowers understand how the reverse mortgage works, its costs and financial implications, available alternatives, homeowner responsibilities, and what can cause the loan to become due and payable.

What is the difference between a HECM and a proprietary reverse mortgage?
A HECM is FHA-insured and generally available to eligible homeowners age 62 and older.

Proprietary reverse mortgages are offered by private lenders and aren't FHA-insured. Depending on the program and state, some may be available beginning at age 55 and may offer different loan amounts, property eligibility, or features.

Reverse Second Mortgage Questions

What is a reverse second mortgage?
A reverse second mortgage is a proprietary reverse mortgage designed to allow an eligible homeowner to access equity without replacing an eligible existing first mortgage.

Why would I consider a reverse second mortgage?
It may be worth considering if you have a first mortgage with a low interest rate or favorable terms that you don't want to give up simply to access additional home equity.

Do I still make my first-mortgage payment?
Yes. The existing first mortgage remains in place, so its required payments must continue.

Which Reverse Mortgage Is Right for Me?

There isn't one reverse mortgage that's right for everyone.

We'll compare factors such as:

• Your age

• Home value and available equity

• Existing mortgage balance

• Current mortgage rate and payment

• How much equity you want to access

• How you want to receive the proceeds

• Whether you're staying in your current home or purchasing another

• Your long-term plans and financial goals

Have More Questions?

A reverse mortgage is a significant financial decision. My goal is to help you understand the options and differences so you can make an informed decision about whether one fits your situation.

REQUEST A REVERSE MORTGAGE REVIEW | CONTACT GIDGET

This information is provided for general educational purposes and is not a commitment to lend. Reverse mortgage eligibility, proceeds, rates, costs, features, property requirements, age requirements, and availability vary by program and lender. FHA HECM and proprietary reverse mortgage programs have different requirements.