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Reverse Mortgage

A reverse mortgage is a home loan to tap into a home's equity that is determined by the lender by finding the appraised value and subtracting out what is owed on a traditional mortgage.

Rather than selling your house to the bank, you maintain complete ownership of your home for the entire life of the loan.  As long as you maintain your home and keep the property taxes paid and remain living in the home, you cannot be forced by the lender to sell the house and repay the loan.

Once the last borrower passes away or up to one full year after they have moved out, the home is then sold with the proceeds paying off the amount borrowed and accrued interest. Any sale proceeds left over goes to the homeowner or their beneficiaries.

Three Kinds of Reverse Mortgage

Home Equity Conversion Mortgages (HECMs)

HECMS make up about 95% of all reverse mortgages.  They do not have a financial assessment to qualify.  They are insured by the Federal Housing Administration (FHA), which not only protects the lender if you fail as a borrower but protects the borrower should the lender fail.  And with a HECM, when it comes time to pay back the loan, they never require more than the value of the home.

Single Purpose Reverse Mortgages

These are typically offered by a few non-profits as well as state and local government agencies.  Usually, they have the lowest costs, but can only be used for specific purposes.  Often this type of reverse mortgage is used for home renovations to allow the occupant to age in place or to keep property taxes paid.

Proprietary Reverse Mortgages

Typically backed by the private company that makes the loan.  Usually designed to help borrowers with high-value homes.

Home Equity Conversion Mortgages

As the HECM is the most common loan, we will focus our discussion.

Requirements of a HECM

  • The borrower must own their own home.
  • They must be at least 62 years old.
  • They must have equity.
  • The home must be in good condition.
  • Cannot have another home loan at the same time.

Can include single-family homes, manufactured homes built after 1976, 2 -4 unit properties, condos, and townhouses.

Use for HECM Funds

When a HECM loans is taken out, first any money borrowed against the house must be paid off first.  After that, the funds are at the borrower's discretion.

How Much Money Can You Borrow

FHA's current lending limit for a HECM is $765,600.

Because with every month interest gets added to the balance of the loan each month.  So lenders will generally not want to lend more than 80 to 85% of the home's value.  The age of the borrower will also be factored in as well as current interest rates and home values.

The National Reverse Mortgage Lender's Association has a simple calculator that will tell help you estimate what you can borrow.  You input age, zip code, home value, and the outstanding mortgage to calculate what you will be able to borrow.

Getting Assistance with Reverse Mortgages

If you are just doing your initial research, please visit  If you would like a referral to a local lender who can help you with a reverse mortgage, we have several team members, just fill out our form to request assistance.  (that's the orange button below)