Reverse Mortgage FAQ’s

Below is a listing of basic frequently asked questions and answers about reverse mortgages. In addition to these basic reverse mortgage FAQ’s, we have questions and answers focusing on more specific reverse mortgage topics:

Reverse Mortgages and Taxes

Reverse Mortgage Counseling

Reverse Mortgage Rates and Fees

Questions From Visitors

If you have a question about reverse mortgages not included here, you can use the form at the bottom to submit it! We’ll do our best to get you a prompt and accurate reply.

Basic Reverse Mortgage Questions and Answers

1. What is a reverse mortgage?
2. Why the name “reverse mortgage”?
3. Why would anyone want to go deeper in debt in retirement?
4. Can any homeowner get a reverse mortgage?
5. Will my credit score or income level be a factor?
6. If I pass away, will my children be left with debts?
7. Doesn’t the lender get title to my home with a reverse mortgage?
8. Isn’t a reverse mortgage a “last resort” loan intended primarily for low-income homeowners?
9. I’ve heard reverse mortgages called “non-recourse” loans. What does this mean?
10. What are the main advantages of a reverse mortgage?
11. What are the disadvantages of a reverse mortgage?
12. Can I qualify for a HUD reverse mortgage?
13. Can I apply if I didn’t buy my present house with FHA mortgage insurance?
14. What types of homes are eligible?
15. What’s the difference between a reverse mortgage and a bank home equity loan?
16. Can the lender take my home away if I outlive the loan?
17. Will I still have an estate that I can leave to my heirs?
18. How much money can I get from my home?
19. Should I use an estate planning service to find a reverse mortgage? I’ve been contacted by a firm that will give me the name of a lender for a “small percentage” of the loan.
20. How do I receive my payments?
21. How long does it take to get a reverse mortgage?
22. Once loan papers are signed, how long do I have to change my mind if I get “cold feet” and decide that a reverse mortgage isn’t right for me?
23. If I cancel my loan during the three-day “right of recession” period, will I lose the fees and charges I paid?
24. What documents will I be required to show in order to process a reverse mortgage?
25. How do I find a reverse mortgage lender?
26. What are the top reasons most people take out a reverse mortgage?

1. What is a reverse mortgage?

   A reverse mortgage is a special type of home loan that lets a homeowner convert a portion of the equity in his or her home into cash. The equity built up over years of home mortgage payments can be paid to you. But unlike a traditional home equity loan or second mortgage, no repayment is required until the borrower(s) no longer use the home as their principal residence. The HUD HECM (home equity conversion mortgage) reverse mortgage provides these benefits, and it is federally-insured as well.

2. Why the name “reverse mortgage”?

   These mortgages work just the reverse of regular or “forward” mortgages. Under a traditional (or forward) mortgage, an individual borrows money to buy a house and makes periodic loan payments to a lender. Under a reverse mortgage, a homeowner borrows against the equity in her house and receives money from a lender. The financial results also are the reverse of a regular mortgage: with a regular mortgage your debt decreases and your home equity rises as loan payments are made; with a reverse mortgage, your debt increases and equity declines over the life of the loan.

3. Why would anyone want to go deeper in debt in retirement?

   Your home equity can be thought of as a form of savings - just like an IRA or 401k plan - that can be used to help finance your retirement. In fact for most Americans, home equity is their single largest form of savings. So, while a reverse mortgage is a form of debt, it is also a tool to access home equity savings that can be responsibly spent down to improve your quality of life in retirement. Two main benefits of a reverse mortgage are:

   • No matter how much you borrow from the progam over the course of your retirement, you will never owe more than the market value of your home.
   • You can tap the equity savings in your home without selling. Most senior homeowners indicate that they prefer to remain in their homes during retirement.

4. Can any homeowner get a reverse mortgage?

   No. Here are the basic qualifications that must be met to be eligible for a reverse mortgage:

   • You must be a homeowner and live in the home as your primary residence;
   • You must ownt the home outright or have a relatively small outstanding mortgage balance that can be paid off with the reverse mortgage proceeds;
   • All homeowners on the title must be at least 62 years old;
   • The home must be in generally good repair, meet FHA property standards or be able to be brought up to standards using the reverse mortgage loan proceeds.

5. Will my credit score or income level be a factor?

   No. Unlike regular mortgages, there are no income or credit score requirements to qualify for a reverse mortgage. This is because the expectation is that loan repayment will come from the ultimate sale of the home. There are a few basic credit standards that must be met, however:

   • The homeowner(s) cannot currently be in bankruptcy;
   • There can be no liens against the home;,/li>
   • The homeowner(s) cannot be delinquent on any debt owed to the federal government.

6. If I pass away, will my children be left with debts?

   The amount owed by the estate on a reverse mortgage can never exceed the market value of the home. A reverse mortgage can actually protect your estate because the accrued loan will never exceed the value of the home. For example, if you pass away and leave to the children: A home worth: $200,000
   An investment portfolio worth: $100,000
   An unpaid reverse mortgage Loan worth: -$300,000

   Your estate would get the full investment portfolio of $100,000, even though full repayment of your reverse mortgage is not covered by the value of your home.

7. Doesn’t the lender get title to my home with a reverse mortgage?

   No. The lender places a lien on the home just the same as with a traditional mortgage or home equity loan. The lien ensures the loan is repaid when the property is sold. Title to the home remains with homeowner.

8. Isn’t a reverse mortgage a “last resort” loan intended primarily for low-income homeowners?

   Some experts do place reverse mortgages in the category of “last resort” loans primarily because the associated costs and fees tend to be very high. These experts advise seniors to first consider other options such as selling the home, home equity line of credit, or tapping other savings. On the other hand, the newer generation of retirees is more accepting of using home equity for living expenses. More and more reverse mortgages are being taken out by homeowners wanting to travel, help pay for grandkids’ college, or just improve their living standard. Bottom line: No, reverse mortgages aren’t just for low-income homeowners or homeowners facing a financial emergency.

9. I’ve heard reverse mortgages called “non-recourse” loans. What does this mean?

   This means that the only thing pledged for repayment of the loan is the value of the home when sold. The lender has no recourse against your other assets or other assets of your estate even if the amount owed exceeds the value of the home.

10. What are the main advantages of a reverse mortgage?

    • Homeowners can pull needed cash from the equity of the home, without incurring monthly expenses.
    • Lenders cannot force homeowners to sell the property to pay back the loan.
    • Reverse mortgages guarantee that the homeowner can stay on the property for as long as he or she lives, even if the outstanding loan and interest grow to exceed the value property’s value.

11. What are the disadvantages of a reverse mortgage?

    • Reverse mortgage fees can be high, although the fees are often rolled into the loan and not paid upfront. A reverse mortgage can cost thousands more than a conventional mortgage.
    • Reverse mortgages are complex and counter-intuitive to most people used to paying down a traditional mortgage most of their adult lives. It is particularly important for homeowners to do their homework, get sound advice and be certain they understand what they are doing.
    • Reverse mortgages will reduce the size of (or possibly eliminate) the estate left to heirs.

    # Reverse mortgages will reduce the size of (or possibly eliminate) the estate left to heirs.

12. Can I qualify for a HUD reverse mortgage?

    To be eligible for a HUD reverse mortgage, HUD’s Federal Housing Administration (FHA) requires that the borrower is a homeowner, 62 years of age or older; own your home outright, or have a low mortgage balance that can be paid off at the closing with proceeds from the reverse loan; and must live in the home. You are further required to receive consumer information from HUD-approved counseling sources prior to obtaining the loan. You can contact the Housing Counseling Clearinghouse on 1-800-569-4287 to obtain the name and telephone number of a HUD-approved counseling agency and a list of FHA approved lenders within your area.

13. Can I apply if I didn’t buy my present house with FHA mortgage insurance?

    Yes. It doesn’t matter if you didn’t buy it with an FHA-insured mortgage. Your new HUD reverse mortgage will be a new FHA-insured mortgage loan.

14. What types of homes are eligible?

    Your home must be a single family dwelling or a two-to-four unit property that you own and occupy. Townhouses, detached homes, units in condominiums and some manufactured homes are eligible. Condominiums must be FHA-approved. It is possible for individual condominiums units to qualify under the Spot Loan program.

15. What’s the difference between a reverse mortgage and a bank home equity loan?

    With a traditional second mortgage, or a home equity line of credit, you must have sufficient income versus debt ratio to qualify for the loan, and you are required to make monthly mortgage payments. The reverse mortgage is different in that it pays you, and is available regardless of your current income. The amount you can borrow depends on your age, the current interest rate, and the appraised value of your home or FHA’s mortgage limits for your area, whichever is less. Generally, the more valuable your home is, the older you are, the lower the interest, the more you can borrow. You don’t make payments, because the loan is not due as long as the house is your principal residence. Like all homeowners, you still are required to pay your real estate taxes and other conventional payments like utilities, but with an FHA-insured HUD Reverse Mortgage, you cannot be foreclosed or forced to vacate your house because you “missed your mortgage payment.”

16. Can the lender take my home away if I outlive the loan?

    No! You do not need to repay the loan as long as you or one of the borrowers continues to live in the house and keeps the taxes and insurance current. You can never owe more than your home’s value.

17. Will I still have an estate that I can leave to my heirs?

    When you sell your home or no longer use it for your primary residence, you or your estate will repay the cash you received from the reverse mortgage, plus interest and other fees, to the lender. The remaining equity in your home, if any, belongs to you or to your heirs. None of your other assets will be affected by HUD’s reverse mortgage loan. This debt will never be passed along to the estate or heirs.

18. How much money can I get from my home?

    The amount you can borrow depends on your age, the current interest rate, and the appraised value of your home or FHA’s mortgage limits for your area, whichever is less. Generally, the more valuable your home is, the older you are, the lower the interest, the more you can borrow.

19. Should I use an estate planning service to find a reverse mortgage? I’ve been contacted by a firm that will give me the name of a lender for a “small percentage” of the loan.

    HUD does NOT recommend using an estate planning service, or any service that charges a fee just for referring a borrower to a lender! HUD provides this information without cost, and HUD-approved housing counseling agencies are available for free, or at minimal cost, to provide information, counseling, and free referral to a list of HUD-approved lenders. Call 1-800-569-4287, toll-free, for the name and location of a HUD-approved housing counseling agency near you.

20. How do I receive my payments?

    You have five options:

    • Tenure - equal monthly payments as long as at least one borrower lives and continues to occupy the property as a principal residence.
    • Term - equal monthly payments for a fixed period of months selected.
    • Line of Credit - unscheduled payments or in installments, at times and in amounts of borrower’s choosing until the line of credit is exhausted.
    • Modified Tenure - combination of line of credit with monthly payments for as long as the borrower remains in the home.
    • Modified Term - combination of line of credit with monthly payments for a fixed period of months selected by the borrower.

21. How long does it take to get a reverse mortgage?

    The reverse mortgage loan process consists of four steps: meeting with a counselor, meeting with the lender, getting the home appraised, and closing. The entire process will generally take at least thirty days and, more often, sixty to ninety days.

22. Once loan papers are signed, how long do I have to change my mind if I get “cold feet” and decide that a reverse mortgage isn’t right for me?

    Like other types of loans, reverse mortgages are governed by the Truth in Lending Act (TILA) which provides consumers with a three-day right of rescission during which you can change your mind and cancel the loan. This act gives you extra time to carefully consider your new loan. Sometimes called a cooling off period, it allows you 3 extra (business) days from the date loan papers are signed to be certain the reverse mortgage is exactly what you expected.

23. If I cancel my loan during the three-day “right of recession” period, will I lose the fees and charges I paid?

    You will be refunded most fees incurred. When a consumer rescinds a transaction, the security interest giving rise to the right of rescission becomes void and the consumer will no longer be liable for any amount, including any finance charge. Within 20 calendar days after receipt of a notice of rescission, the lender is required to return any money or property that was given to anyone in connection with the transaction and must take any action necessary to reflect the termination of the security interest.

24. What documents will I be required to show in order to process a reverse mortgage?

    You should have available and be prepared to produce the following documents during the reverse mortgage loan process:

    • driver’s license or other other official picture ID;
    • Social Security and/or Medicare card;
    • current mortgage statement (or relevant contact info) if you have an outstanding mortgage on the home;
    • declarations page from your current homeowners insurance policy;
    • the original signed certificate from your reverse mortgage counseling session.
    • certificate of death if there is a deceased spouse on the title to the home’
    • copy of the original property deed;
    • copy of the power of attorney, living will, or trust document if these situations are applicable to you.

25. How do I find a reverse mortgage lender?

    The market for reverse mortgages is growing rapidly, but they are still a niche financial products not available from most banks or credit unions. Assuming your first step in the loan process is to receive required counseling, you can ask your counselor for a list of qualified lenders in your area. Counselors cannot recommend or “steer” you towards a particular lender. You can also find reverse mortgage lenders at various websites such as .

26. What are the top reasons most people take out a reverse mortgage?

    According to a study done by AARP, the main reasons people give for considering a reverse mortgage are as follows:

    Pay off mortgage (20%)
    Home repairs/improvements (18%)
    Improve quality of life (14%)
    Everyday expenses (10%)
    Emergencies/unexpected (9%)
    Pay off non-mortgage debts (7%)
    Health or disability (5%)
    Property taxes/insurance (5%)
    Financial help to family (2%)
    Investments, annuities, or long-term care insurance (1%)
    Household chores (1%)

    The three top reasons - pay off mortgage, home repairs, improve quality of life - accounted for more than one-half of the primary uses of reverse mortgages.