You probably have questions. This is exactly where you should start.
We'll walk through how reverse mortgages work, what happens to your home and equity, and the alternatives worth considering, so you can understand your options before deciding what's right for you.
If you have a traditional mortgage, you already know how that works: you make a monthly payment to the lender.
A reverse mortgage changes that relationship. It allows eligible homeowners to access some of the equity they've built in their home without making a required monthly mortgage payment.
You make monthly mortgage payments, and your loan balance generally gets smaller over time.
Loan balance over time generally decreases.
You access equity you've already built without a required monthly mortgage payment, and your loan balance generally grows over time.
Loan balance over time generally increases.
Depending on the loan and how you choose to receive the funds, that money may be available in different ways:
Receive money on a regular schedule.
Keep funds available to access when you need them.
Receive available funds at closing, subject to program limits.
Some options can be combined based on how you want to access your equity.
Instead of making monthly payments that generally reduce what you owe, interest and fees are added to the reverse mortgage balance over time. That means the loan balance generally grows rather than shrinks.
You don't make a required monthly mortgage payment.
Interest and fees are added to the loan balance over time.
The loan balance generally grows over time.
A reverse mortgage doesn't mean signing your home over to the lender. You keep the title to your home and continue to own it.
You don't have to have everything figured out. We're happy to talk through your questions and help you understand your options.
Your equity isn't a fixed number. It's the difference between what your home is worth and what you owe on it.
Over time, the reverse mortgage balance generally grows as you use funds and interest and fees are added. Your home's value can also change, so the amount of remaining equity may increase or decrease.
Illustrative example only. Actual loan balance and remaining equity will vary based on the amount borrowed, interest and fees, and changes in the home's value over time.
As you access funds and interest and fees are added, the reverse mortgage balance generally grows. Your home's value can also change, so the amount of remaining equity may increase or decrease.
The reverse mortgage starts using a portion of your home's equity.
As the loan balance grows, the amount of remaining equity may decrease. Your home's value may also change.
The reverse mortgage is repaid from the proceeds of the sale. Any remaining equity belongs to you.
You sell your home, usually through a traditional real estate sale.
The loan balance, including any accrued interest and fees, is paid from the sale proceeds.
After the loan is repaid, any remaining equity from the sale belongs to you.
A reverse mortgage can be useful in the right situation, but it isn't right for everyone.
Flexible access to equity
Replace your current mortgage
Access equity by moving
Keep things as they are
For an FHA-insured Home Equity Conversion Mortgage (HECM), borrowers must be 62 or older. Other eligibility requirements also apply, including requirements related to your home, equity, finances, and primary residence.
Age and eligibility requirements may differ for reverse mortgage products that are not FHA-insured HECMs.
No. You may still qualify for a HECM if you have an existing mortgage, but that mortgage must be paid off when the reverse mortgage closes. Funds from the reverse mortgage can be used to pay off the existing loan.
The amount of equity needed and other qualification requirements can vary based on the loan program, lender, property, and borrower circumstances.
There isn't one percentage that applies to everyone. With a HECM, the amount available depends on factors including age, current interest rates, and the home's value, subject to applicable FHA limits. Existing mortgage debt and other required obligations can also affect the amount ultimately available to you.
Available proceeds vary by borrower, property, interest rates, loan program, and lender. Any estimate is not a guarantee of the amount you may qualify to receive.
Yes, it is possible if you don't meet the requirements of the loan. A reverse mortgage doesn't transfer ownership of your home to the lender, but HECM borrowers must continue to use the home as their primary residence, pay required property charges such as property taxes and homeowners insurance, and keep the home in good repair.
Failing to meet these requirements can cause the loan to become due and may ultimately lead to foreclosure.
Requirements and circumstances that can cause a loan to become due may vary by reverse mortgage product and loan terms.
When the last borrower dies, a HECM generally becomes due and payable. If there is a co-borrower, or in certain circumstances an eligible non-borrowing spouse, different protections may apply.
If the loan becomes due, heirs generally have options that may include selling the home and using the proceeds to repay the loan or keeping the home by satisfying the amount required under HECM rules. Any equity remaining after the loan is repaid belongs to the estate or heirs.
The options and timelines available depend on the loan, who is living in the home, and the specific circumstances. Heirs should contact the loan servicer promptly after the borrower's death.
Potentially, yes. A co-borrower can generally remain in the home after another borrower dies as long as the HECM requirements continue to be met. Certain eligible non-borrowing spouses may also qualify to remain in the home under HUD rules.
Heirs who want to keep the home after the loan becomes due generally need to satisfy the HECM by paying the lesser of the outstanding loan balance or 95% of the home's current appraised value . They may need other funds or new financing to do so.
Spousal protections, repayment options, and timelines depend on the individual circumstances and applicable HUD requirements.
With an FHA-insured HECM, you or your heirs generally won't have to make up the difference from other assets simply because the loan balance exceeds the home's value. HECMs are non-recourse loans, and FHA mortgage insurance provides protection when the amount owed exceeds the home's value.
When a HECM becomes due after the last borrower dies, heirs can generally satisfy the loan by paying the lesser of the outstanding loan balance or 95% of the home's current appraised value .
These protections apply specifically to FHA-insured HECMs. Other reverse mortgage products may have different terms and protections.
Yes. A HECM for Purchase allows eligible borrowers age 62 or older to use HECM proceeds toward the purchase of a new primary residence. You'll need to bring enough funds to closing to cover the difference between the HECM proceeds and the purchase price, along with applicable closing costs.
Not every property qualifies, and you must continue meeting HECM requirements after the purchase, including occupying the property as your primary residence and keeping up with required property charges and maintenance.
Eligibility, available proceeds, required funds at closing, fees, rates, terms, and product availability can vary by borrower, property, lender, and loan program.
Important: Reverse mortgage programs, eligibility requirements, rates, fees, available proceeds, and loan terms can vary by lender and loan type. Information provided here is for general educational purposes and is not a commitment to lend. FHA-insured Home Equity Conversion Mortgages (HECMs) are subject to HUD requirements.
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