Common Questions and Answers

  • I have a $200,000 home. If I get a reverse mortgage and spend $50,000 then pass away, does the bank get my house?
  • No. Your estate would sell the house for $200,000. The estate would pay the bank $50,000. The other $150,000 goes to your heirs.
  • My spouse is not 62. What can I do?
  • In some cases, the younger spouse can be removed from the title using a "quit claim deed." However, there are significant risks to consider such as what will happen if the older spouse passes away prematurely.
  • How popular are reverse mortgages?
  • The program is growing at 49% annually with 107,000 loans issued in 2007. It was started by the FHA and signed by Ronald Reagan in 1988. Reverse mortgages began to be popular in 1999 when policy changes lowered interest rates and cut closing costs.
  • Am I qualified for a reverse mortgage if I have an existing loan?
  • Yes. The existing loan will be paid off during the closing.
  • Will my heirs be forced to sell my home?
  • No. If they decide to keep it, they can refinance the property with a traditional mortgage. Otherwise, they may sell the house and use the proceeds to repay the loan balance and keep the difference.
  • Can the lender take my home away if I outlive the loan?
  • No. You can not "outlive" the loan. As long as one borrower continues to live in the home and keeps taxes and insurance current, you can not be evicted, foreclosed, or asked for repayment.
  • Will a reverse mortgage affect my public benefits?
  • A reverse mortgage will not affect Social Security or Medicare but may affect Medicaid. You should seek specific advice on your situation.
  • Is the money tax-free?
  • Yes. The loan proceeds are not considered income by the IRS.
  • Are there restrictions on how I use the money?
  • No. It's your money, after all.
  • My spouse is permanently in a nursing home. Can we participate? Yes, only one owner is required to occupy the property.
  • What is HECM?
  • More than 90% of reverse mortgages are FHA "Home Equity Conversion Mortgages." There are other types of reverse mortgages for specific situations, such as high-value homes.
  • 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. HUD's reverse mortgage provides these benefits, and it is federally-insured as well.
  • 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.
  • 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.
  • 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.
  • 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."
  • 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.
  • 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.
  • 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.
  • 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.
  • 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.