Is a Reverse Mortgage Right for You?

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The Lowdown on Reverse Mortgage Loans...

Reverse Mortgage

These types of mortgages allow homeowners 62 and older to convert a portion of their home’s equity into cash, a line of credit, or an annuity. Unlike a traditional mortgage, there’s no monthly payment to the lender; instead, the loan is repaid when the homeowner sells the house, moves out permanently, or passes away.

Pros:

No Monthly Payments: Homeowners can remain in their homes without worrying about mortgage payments.
Flexibility: Funds can be used for anything—medical expenses, home improvements, or even just supplementing retirement income.
Non-Recourse Feature: You’ll never owe more than the home is worth, protecting both the borrower and their heirs.

Cons:

High Fees: Reverse mortgages often come with higher closing costs and fees.
Impact on Government Benefits: The extra income could affect eligibility for Medicaid and other benefit programs.
Reduced Home Equity: Since you’re borrowing against your home’s value, there’ll be fewer assets to leave to your heirs.

Is It Right For You?

A reverse mortgage is best suited for a specific group of people, primarily based on their financial needs, age, and circumstances. The most obvious group. Older homeowners with a lot of equity can turn this asset into cash without having to move or make monthly payments.

If you’re committed to staying in your current home for the long haul, a reverse mortgage can help you achieve that by giving you the financial flexibility to cover upkeep costs, healthcare, or other expenses.

Some opt for a line of credit option on a reverse mortgage, which they don’t draw upon unless there’s an emergency or unexpected cost. This provides a safety net without incurring debt until the funds are used.

Reverse Requirements

Requirements	Explanation
Minimum Age	The youngest borrower must be at least 62 years old.
Credit History as a Factor	Unlike traditional mortgages where a high credit score is often a must, reverse mortgage lenders are generally more lenient. The focus is less on your credit score and more on your overall financial picture, including your ability to pay property taxes, insurance, and maintain the home.
Down Payment	Only required for purchase and that depends on age.
Financial Assessment	Lenders do conduct a financial assessment. This assessment examines your income, assets, credit history, and monthly living expenses. The aim is to gauge your financial capability to meet the obligations of the reverse mortgage.
Counseling	Must attend a counseling session with a HUD-approved counselor to ensure you fully understand the terms, obligations, and potential consequences of a reverse mortgage.
Loan Types	VA loans come in various terms and types, such as fixed-rate or adjustable-rate, which can also affect eligibility.
Property Use and Type	The property must meet certain health and safety standards and pass an FHA appraisal. Reverse loans are only for primary residences, not investment properties or second homes.
Funding Fee	Most VA loan borrowers are required to pay a funding fee. This is a one-time payment that can be financed as part of the loan or paid in cash at closing. The fee varies based on the type of borrower, the size of the down payment, and whether it’s your first VA loan or a subsequent one. Some are exempt from paying the fee, like veterans receiving VA disability compensation.
Documentation	You may need to provide bank statements, W-2s, Govt. ID and Social Security. Information on other assets like retirement accounts and possibly tax returns.

Is It Right for You?

Our Reverse Mortgage Rates Are Low & Our Process is Quick & Painless

A reverse mortgage is a loan for seniors age 62 and older. HECM reverse mortgage loans are insured by the Federal Housing Administration (FHA) and allow homeowners to convert their home equity into cash with no monthly mortgage payments.

We’re here to make the reverse mortgage process a whole lot easier, with tools and expertise that will help guide you along the way, starting with our FREE Reverse Mortgage Qualifier.

We’ll help you clearly see differences between reverse mortgage options, allowing you to choose the right one for you.

Why a Reverse Mortgage?

A reverse mortgage pays off your existing mortgage, should you have one, by allowing you access to the home equity you’ve worked so hard to build. Any money left after paying off your existing mortgage is available to use as you see fit.

Reverse Mortgage Process

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Frequently Asked Questions (FAQs)

What is a HECM Reverse Mortgage?

A HECM reverse mortgage is a special type of loan designed for folks 62 and up. Not all reverse mortgages are HECM’s but all HECM’s are reverse mortgage. The difference being that the HECM is governed and guaranteed by HUD. It lets you turn some of your home’s value into either a cash lump sum, regular payments, or a flexible line of credit. What sets it apart? No monthly mortgage payments required. You can even use it to buy a new home. All you’ve got to do is stick to the loan terms, like keeping up the home and staying on top of taxes and insurance.

The kicker? You don’t have to pay the loan back until you sell your house or if the last homeowner (or a qualified non-borrowing spouse) isn’t living there anymore. So, unlike your standard home equity loan or HELOC, you’re not on the hook for immediate repayments. But remember, if you slip up on maintaining the property or fall behind on taxes and insurance, the loan could be due sooner than you’d like.

How does a HECM Reverse Mortgage work?

The loan amount you can get hinges on two key things: your age and your home’s appraised value.
A nfiancial review is done to make sure you can handle long-term costs like taxes and insurance.
You’ll need to go through a counseling session with a HUD-approved agency to clear up any questions you might have.
The loan will first be used to pay off any existing mortgage you have on the property.
You have options for how you get your cash: a lump sum upfront, installment payments over time, or a line of credit that grows if you don’t use it up. Just be cautious — if you default or the loan matures, that growing cushion disappears.
Keep up with your ongoing property expenses, like taxes, insurance, and any homeowner’s association fees, to avoid any hiccups.
With no monthly mortgage payments and a bit more cash—or a growing line of credit—you’re well-placed to shape the retirement you’ve always envisioned.

Am I eligible?

To qualify for a HECM reverse mortgage, you’ve got a few boxes to tick:

You need to be at least 62 years old.
The property has to be your main home.
Your home needs to meet the FHA’s baseline standards, including flood requirements.
Eligible properties are either a single-family home, a two-to-four-unit place where you live in one of the units, or a HUD-approved condo. If it’s a newly built home, you’ll need a Certificate of Occupancy or its equivalent before applying.
Your home equity needs to be up to snuff. A specialist from Finance of America Reverse LLC (FAR) can help you figure out if you’ve got enough.

Beyond just ticking off these qualifications, our Reverse Mortgage Specialists can also help you determine if a HECM is the right fit for your unique situation and give you the lowdown on all the loan specifics.

How much equity do you need to have to qualify for a reverse mortgage?

To be in the running for a reverse mortgage, you’ll need a decent chunk of equity in your home. While there’s no hard-and-fast equity requirement, having an existing mortgage doesn’t automatically disqualify you. The money you get from the reverse mortgage will first go towards paying off that existing loan, with the rest folded into your new reverse mortgage balance.

A good rule of thumb is to aim for at least 50% equity in your home before considering a reverse mortgage. Why? Because the funds from the reverse mortgage must first cover any existing mortgage balance you have. If you’ve got less than 50% equity, there’s a good chance the reverse mortgage proceeds won’t be enough to fill that gap.

How much can I get?

The amount you can get from a HECM reverse mortgage isn’t a one-size-fits-all deal. It’s influenced by several things: the age of the youngest person on the loan (or a non-borrowing spouse), your home’s current market value, how much equity you’ve got, FHA lending caps, prevailing interest rates, and the specific type of reverse mortgage and payment plan you opt for. Want to get down to brass tacks? A Reverse Mortgage Specialist from FAR can provide a no-obligation quote customized to your unique circumstances.

How do I receive the proceeds?

You can take your funds as a lump sum, a line of credit, or as monthly payments. You can also use a combination of these options.

What are my loan obligations?

The borrower must meet specific criteria to keep the reverse mortgage intact. You need to live in the home as your primary residence and handle all the associated property costs—think taxes, insurance, any extra fees, and possibly homeowners’ association dues. Plus, it’s your job to keep the home in good shape. If you drop the ball on any of these obligations, be prepared to repay the loan sooner than you might have planned.

Will the bank own my home?

Nope, you still own the house, same as you would with a standard mortgage. All you’ve got to do is stick to the loan’s terms—keeping up with property taxes, homeowners’ insurance, and any other property-related fees. You’re free to sell your home whenever you like.

What are the costs associated with a reverse mortgage?

Initial expenses can range from an appraisal fee and origination charges to closing costs, mortgage insurance premiums, and possibly a small fee for HECM counseling. Plus, there’s a servicing fee to consider. The good news is that you can usually bundle these upfront costs into the loan itself, which helps reduce what you pay out-of-pocket. As for closing costs, they’re generally in the same ballpark as those for a conventional mortgage. Over the life of the loan, you’ll also see interest and a monthly insurance premium accumulate. For a thorough rundown of all these costs, a Reverse Mortgage Specialist can give you the full scoop.

When do I have to pay the mortgage back?

You’re off the hook for making principal and interest payments as long as you’re living in the home as your main residence. The repayment part kicks in only when you sell the house or if the last person on the loan (or a qualified non-borrowing spouse) no longer calls the home their primary residence. As long as you stick to the loan’s conditions, you won’t need to worry about paying it back until one of these scenarios happens.

Am I spending my children’s inheritance.

A reverse mortgage could be a solid strategy for maintaining your lifestyle during retirement. Given that it’s a significant decision with ripple effects for your family, we strongly recommend looping them into the decision-making process.

When it’s time to sell your home or if it ceases to be your main residence, that’s your cue to settle the loan. Once it’s all squared away, any leftover equity is yours or goes to your estate and can be passed down to your heirs.

Can I buy a house with a reverse mortgage?

Absolutely, you can! With the HECM (Home Equity Conversion Mortgage) reverse mortgage for purchase allows you to buy a new home. The process has some similarities to using a traditional mortgage for purchasing a home. You’ll still work with a real estate agent, and many of the typical closing costs and timelines apply.

As you get older, you might find yourself itching to relocate closer to family, downsize to a more manageable space, or even upsize to that dream retirement home—be it beachfront, next to a golf course, or in a bustling active adult community. A reverse mortgage for purchase can be a game-changer in making those retirement moves a reality.