Frequently Asked Questions

To qualify for a reverse mortgage, you must:

• Be at least 62 years old (all borrowers on title)

• Own your home outright or have significant equity (typically 50%+ equity)

• Live in the home as your primary residence

• Be able to pay property taxes, insurance, and home maintenance

• The home must meet FHA property standards

• Complete HUD-approved counseling session

Credit score is not a major factor. Even with past credit issues, you may still qualify.

Eligible property types include:

• Single-family homes (most common)

• FHA-approved condominiums

• Townhouses

• 2-4 unit properties (you must live in one unit)

• Manufactured homes built after June 15, 1976

The property must be your primary residence where you live most of the year. Vacation homes and investment properties do not qualify.

Yes, absolutely. In fact, many people use reverse mortgage proceeds to pay off their existing mortgage. This eliminates monthly mortgage payments and can significantly improve monthly cash flow.

The reverse mortgage must be in first lien position, so any existing mortgage would be paid off at closing using the reverse mortgage proceeds. You'll receive any remaining funds after the existing mortgage is paid off.

Yes. Unlike traditional mortgages, your credit score is not the primary qualifying factor. Lenders do review credit to ensure you have a history of paying property taxes, insurance, and maintaining your home, but past credit problems don't automatically disqualify you.

Many homeowners with less-than-perfect credit successfully obtain reverse mortgages. The focus is on your age, home equity, and ability to maintain the property going forward.

You can only have one reverse mortgage at a time, and it must be on your primary residence. If you have a reverse mortgage on a previous home and want one on your new primary residence, you'll need to pay off the old reverse mortgage first (typically through selling the previous home).

The typical timeline is 30-45 days from application to closing:

• Days 1-7: Application, document collection, HUD counseling (required)

• Days 8-21: Home appraisal, title work, underwriting

• Days 22-30: Final approval, closing preparation

• Day 30-45: Closing and funding

Some cases move faster, some take a bit longer depending on appraisal scheduling and documentation.

HUD counseling is a mandatory, independent counseling session with a HUD-approved counselor. It typically lasts 1-2 hours (can be done by phone). The counselor explains:

• How reverse mortgages work

• Your obligations as a borrower

• Alternatives to consider

• Costs and fees

• Rights and protections

This is required by law to ensure you fully understand the product before proceeding. Your lender will provide a list of approved counselors. There's usually a small fee ($125-200) for this service.

Closing is similar to when you bought your home. You'll:

• Sign loan documents with a notary or closing agent

• Review final loan terms and costs

• Ask any last-minute questions

• Receive your funds (or line of credit is established)

You have a 3-day right of rescission after closing, meaning you can cancel the loan for any reason within 3 business days with no penalty.

After the 3-day rescission period ends, funds are typically disbursed within 1-3 business days. How you receive funds depends on the payment option you choose:

• Lump sum: One-time payment deposited to your account

• Line of credit: Available immediately, you draw as needed

• Monthly payments: First payment arrives according to schedule

• Combination: Partial lump sum + line of credit or payments

Yes, you can pay off a reverse mortgage at any time with no prepayment penalty. Some homeowners use them temporarily (for example, to bridge a gap until selling another property) and then pay them off. You have complete flexibility.

Reverse mortgage costs include:

• Origination fee: Up to $6,000 (can be financed into loan)

• FHA mortgage insurance: 2% upfront + 0.5% annually

• Appraisal: $400-600 (varies by location)

• Title insurance and closing costs: $2,000-4,000

• HUD counseling: $125-200

• Servicing fee: Some loans have ongoing monthly servicing fees

Total upfront costs typically range from $10,000-$15,000, but these can be rolled into the loan so you don't pay out-of-pocket. Your specialist will provide exact numbers for your situation.

Yes, you're responsible for:

• Property taxes (same as before)

• Homeowners insurance (same as before)

• HOA fees if applicable (same as before)

• Home maintenance and repairs (same as before)

These are the same expenses you'd have even without a reverse mortgage. Additionally, interest accrues on your loan balance monthly, which increases the amount owed over time.

Interest accrues monthly on the outstanding balance. Unlike a traditional mortgage where you make payments that reduce the balance, with a reverse mortgage the balance grows over time as interest compounds.

Current interest rates typically range from 5-8% depending on market conditions and payment type. The interest is not paid monthly—it's added to your loan balance and only paid when the loan is repaid (typically when you sell, move, or pass away).

Yes. The FHA mortgage insurance protects you in important ways:

• Non-recourse protection: You or your heirs never owe more than the home's value

• Payment guarantee: If your lender goes out of business, FHA ensures your payments continue

• Equity protection: If home value declines below loan balance, insurance covers the difference

This insurance is what makes reverse mortgages safe for homeowners and heirs.

Reverse mortgage proceeds are considered loan proceeds, not income, so they are not taxable. This also means:

• No tax return reporting required for the funds

• Typically doesn't affect Social Security benefits

• Typically doesn't affect Medicare benefits

• Medicaid recipients should consult an advisor (asset-tested programs may be affected)

Interest that accrues may be tax-deductible when the loan is repaid, but consult your tax advisor for specific guidance.

Yes. Common uses include:

• Paying off existing mortgage (eliminate monthly payments)

• Medical expenses and long-term care

• Home repairs, renovations, accessibility modifications

• Supplementing retirement income

• Helping family members (grandchildren's education, etc.)

• Travel and quality of life improvements

• Debt consolidation

• Financial safety net for emergencies

There are no restrictions on how you use the funds.

Key differences:

Reverse Mortgage:

• No monthly payments required

• Available to age 62+

• No income requirement

• Balance grows over time

• Repaid when you sell, move, or pass away

Home Equity Loan/HELOC:

• Monthly payments required

• Available to all ages (usually 18+)

• Income verification required

• Balance decreases as you pay

• Repaid on fixed schedule

Reverse mortgages work best for retirees who want to avoid monthly payments and preserve liquid assets.

No. This is the #1 misconception. YOU own your home with a reverse mortgage. Your name stays on the title. The lender has a lien on the property (just like a traditional mortgage), but they do not own it. You can leave it to your heirs, sell it, or refinance it anytime.

You cannot lose your home due to non-payment of the reverse mortgage (because there are no monthly payments). However, you could lose your home if you:

• Fail to pay property taxes

• Fail to maintain homeowners insurance

• Fail to maintain the property in reasonable condition

• Move out and it's no longer your primary residence

As long as you meet these obligations (which you'd have to meet anyway), you can stay in your home for life.

If you move out permanently (typically defined as more than 12 consecutive months), the reverse mortgage becomes due. You or your heirs would need to repay the loan, usually by selling the home.

If you move temporarily or receive in-home care, you can stay in the home and the reverse mortgage continues. Some homeowners use reverse mortgage funds to pay for in-home care to avoid moving to a facility.

You're protected. Because reverse mortgages are non-recourse loans with FHA insurance, you or your heirs will never owe more than the home's value at the time of sale.

If the loan balance grows to $400,000 but the home is only worth $350,000, FHA insurance covers the $50,000 difference. You never have out-of-pocket repayment obligations.

You have a 3-day right of rescission after closing. During this time, you can cancel the loan for any reason with no penalty and no costs.

After the 3 days, you can still pay off the reverse mortgage anytime without prepayment penalties, but closing costs are non-refundable.

When you pass away (or move out permanently), your heirs have several options:

1. Keep the home: Pay off the reverse mortgage balance (through refinancing, cash, or other means) and keep the home

2. Sell the home: Sell the property, pay off the loan balance, and keep any remaining equity

3. Walk away: Turn the home over to the lender with no debt obligation

Your heirs have up to 12 months to decide (with possible extensions). They are never personally liable for the debt.

No. Reverse mortgages are non-recourse loans, meaning the debt is tied to the home only, not to you or your heirs personally. Your heirs will never owe more than the home's value.

If the balance exceeds the value, they can walk away with no debt. They are not required to pay the difference out of pocket. FHA insurance covers any shortfall.

Your heirs will inherit any equity remaining after the reverse mortgage is repaid. For example:

• Home sells for $500,000

• Reverse mortgage balance is $300,000

• Heirs inherit $200,000

If the loan balance equals or exceeds the home value, there would be no equity, but your heirs never inherit negative equity or debt. The worst-case scenario is they inherit nothing (but owe nothing), not that they inherit debt.