Understanding Your Reverse Mortgage Options
Reverse mortgages are not one single product. Depending on your age, home value, equity, location, and goals, options may include an FHA-insured HECM, a proprietary or jumbo reverse mortgage, a line of credit, or reverse mortgage financing to purchase your next home.
A reverse mortgage can turn a portion of home equity into usable funds without requiring traditional monthly principal and interest mortgage payments. You retain ownership of your home and remain responsible for property taxes, homeowners insurance, maintenance, and other applicable property obligations.
Your Home May Be One of Your Largest Retirement Assets
Many homeowners reach retirement with substantial wealth accumulated in their homes. The challenge is that home equity isn't normally available for spending unless you sell the property, obtain another loan, or otherwise access that equity.
A reverse mortgage creates another option. Instead of viewing the home only as a place to live, eligible homeowners can evaluate whether some of that equity should become part of their retirement and financial strategy.
Improve Cash Flow
Paying off an existing mortgage with reverse mortgage proceeds may eliminate the required monthly principal and interest mortgage payment.
Create Liquidity
Depending on the program, available proceeds may be accessed through a lump sum, scheduled payments, line of credit, or another permitted structure.
Support Retirement
Home equity can potentially become another financial resource alongside Social Security, pensions, retirement accounts, savings, and investments.
There Is More Than One Kind of Reverse Mortgage
Many people hear “reverse mortgage” and assume there is only one program. In reality, there are two broad categories: the FHA-insured Home Equity Conversion Mortgage and privately offered proprietary reverse mortgages.
Understanding both matters because the best solution can depend on the homeowner's age, property value, desired proceeds, property type, location, and financial objectives.
FHA HECM
The Home Equity Conversion Mortgage is the federally insured reverse mortgage program for eligible homeowners age 62 and older.
Proprietary Reverse Mortgage
Private reverse mortgage programs can provide alternatives for higher-value properties, certain borrowers below age 62, and situations that may not fit traditional HECM guidelines.
Reverse for Purchase
Reverse mortgage financing may also allow an eligible homeowner to purchase a new principal residence rather than borrowing only against the home they currently own.
The FHA Home Equity Conversion Mortgage (HECM)
The HECM is the most widely recognized reverse mortgage. It is insured by the Federal Housing Administration and is generally available to eligible homeowners beginning at age 62.
The property generally must be the borrower's principal residence, and HUD-approved reverse mortgage counseling is required as part of the HECM process.
How Much Can You Access?
Available proceeds depend on several factors, including borrower age, property value, current interest rates, existing mortgage balances, and applicable FHA program limits.
FHA Mortgage Insurance
Because the HECM is an FHA-insured program, FHA mortgage insurance is part of the loan structure. This insurance also supports important protections built into the HECM program.
Higher-value homes, younger eligible homeowners, certain property types, or different equity objectives may make a proprietary reverse mortgage worth considering.
Proprietary and Jumbo Reverse Mortgages
Proprietary reverse mortgages are privately offered programs rather than FHA-insured HECMs.
They can provide additional flexibility for homeowners whose age, property value, desired proceeds, or property characteristics do not fit comfortably within the HECM structure.
Jumbo Reverse Mortgages
Certain proprietary programs can provide substantially greater borrowing capacity for higher-value homes than may be available through the FHA HECM structure.
Options Below Age 62
Certain proprietary programs may be available to eligible homeowners beginning at age 55, depending on state, property, program availability, and current underwriting guidelines.
Expanded Program Options
Depending on the program, proprietary reverse mortgages may provide different property eligibility, proceeds, payout structures, or equity-preservation options.
Rather than assuming one product fits every homeowner, we can compare available HECM and proprietary options based on your age, home value, equity, location, objectives, and desired access to funds.
A Reverse Mortgage Line of Credit
One potentially valuable reverse mortgage strategy is accessing available equity through a line of credit rather than taking all available proceeds immediately.
Depending on the loan program, this can provide a pool of available funds that may be accessed later for unexpected expenses, home repairs, healthcare needs, retirement spending, or other purposes.
HECM Line of Credit
Certain adjustable-rate HECM structures provide a line-of-credit option subject to FHA requirements.
Proprietary Line of Credit Options
Certain proprietary reverse mortgage programs may also provide line-of-credit options for eligible borrowers. These can be particularly useful for owners of higher-value homes who want access to equity over time rather than receiving all available proceeds at closing.
Qualification, repayment requirements, rates, fees, available proceeds, and how the credit line operates can differ significantly. The two should be compared based on the homeowner's circumstances.
You Can Use a Reverse Mortgage to Buy Your Next Home
Reverse mortgages aren't limited to homeowners who want to remain in their existing property.
An eligible homeowner may be able to combine reverse mortgage financing with their own funds to purchase another principal residence without taking on a traditional required monthly principal and interest mortgage payment.
Downsize Without Using All Your Cash
A homeowner selling a larger property might use part of the sale proceeds together with reverse mortgage financing to purchase the next home while retaining more liquid assets.
Move Closer to Family
Reverse-for-purchase financing can also be considered when relocating during retirement or moving closer to children, grandchildren, healthcare, or other support.
Buy a Home Better Suited for Retirement
A single-story home, smaller property, lower-maintenance community, or home with accessibility features may better support the next stage of life.
A reverse mortgage can potentially become part of a larger real estate strategy for selling one property and purchasing another.
Do You Still Own Your Home?
Yes. One of the most persistent misconceptions about reverse mortgages is that the lender becomes the owner of the property.
A reverse mortgage is a loan secured by your home. You continue to hold title to the property, subject to the mortgage lien, just as with other mortgage financing.
You must continue meeting the obligations associated with the property and the reverse mortgage.
Property Taxes
Property taxes and applicable property assessments must continue to be paid.
Homeowners Insurance
Required homeowners insurance must generally remain current throughout the loan.
Maintain the Property
The homeowner remains responsible for maintaining the property according to applicable loan requirements.
When Does a Reverse Mortgage Have to Be Repaid?
Unlike a traditional mortgage, a reverse mortgage generally does not require monthly principal and interest payments while the eligible borrower continues to meet the terms of the loan.
The loan generally becomes due following certain events, such as the sale of the home, the last eligible borrower permanently leaving the property, the death of the last borrower, or failure to meet required loan and property obligations.
What Happens When the Home Is Sold?
The reverse mortgage balance is generally paid from the sale proceeds, much like another mortgage lien.
After the mortgage and applicable selling expenses are satisfied, the remaining equity belongs to the homeowner or estate.
You Don't Necessarily Have to Maximize the Reverse Mortgage
Accessing the maximum amount of available equity isn't always the objective.
Some homeowners may want only enough proceeds to eliminate an existing mortgage. Others may want a standby line of credit, supplemental monthly cash flow, or funds for a specific purpose.
Equity Preservation Options
Certain proprietary reverse mortgage programs may allow a homeowner to intentionally preserve a portion of the property's equity rather than maximizing the amount initially available through the loan.
For families concerned about maintaining future equity for housing needs, heirs, or other legacy objectives, this type of structure may be worth comparing with other reverse mortgage options.
The better question is how much equity, if any, should be used to accomplish the homeowner's financial and retirement goals.
What Happens to the Home and the Heirs?
A reverse mortgage does not automatically mean the lender takes ownership of the home when the borrower dies.
Depending on the loan and circumstances, heirs or the estate generally have options for satisfying the reverse mortgage, including selling the property or potentially retaining it by satisfying the applicable loan requirements.
Any remaining equity after the reverse mortgage is satisfied belongs to the homeowner's estate.
The home, title, trust, heirs, retirement income, and use of home equity can all be parts of the same family wealth decision.
How Could Home Equity Fit Into Your Retirement?
A reverse mortgage should not begin with a loan product. It should begin with the problem or opportunity you're trying to address.
Depending on the homeowner's circumstances, potential uses may include:
- Paying off an existing mortgage.
- Improving monthly retirement cash flow.
- Creating a line of credit for future needs.
- Funding home repairs or accessibility improvements.
- Supplementing retirement income.
- Providing liquidity for significant expenses.
- Purchasing a more suitable retirement home.
- Preserving other liquid assets for different purposes.
Once we understand what you're trying to accomplish, we can compare a HECM, proprietary reverse mortgage, traditional financing, home-equity options, selling the property, or simply doing nothing.
Who Might Want to Explore a Reverse Mortgage?
- Homeowners with substantial equity who want greater monthly cash-flow flexibility.
- Retirees who want to remain in their current home.
- Homeowners who want a reserve line of credit for future needs.
- Owners of higher-value homes who may benefit from a proprietary jumbo reverse mortgage.
- Eligible homeowners below age 62 who may qualify for certain proprietary programs.
- Retirees considering selling and purchasing a different home.
- Families coordinating retirement, housing, equity, and legacy goals.
Common Reverse Mortgage Questions
Do I have to be 62 to get a reverse mortgage?
Not necessarily. FHA HECM eligibility generally begins at age 62. Certain proprietary reverse mortgage programs may be available to eligible homeowners beginning at age 55 in applicable states, subject to current program guidelines.
Does the lender take ownership of my home?
No. You retain title to your home. The reverse mortgage creates a lien against the property, similar in that respect to other mortgage financing.
Do I have to make monthly mortgage payments?
Reverse mortgages generally do not require traditional monthly principal and interest mortgage payments while the borrower continues to meet the terms and obligations of the loan. Borrowers may generally make voluntary payments if they choose.
Can I get a reverse mortgage on a high-value home?
Potentially. Proprietary jumbo reverse mortgages are designed in part to provide additional options for owners of higher-value properties beyond the standard HECM structure.
Can I get a reverse mortgage line of credit?
Certain HECM and proprietary reverse mortgage programs may provide line-of-credit options, subject to eligibility and current program requirements.
Can I use a reverse mortgage to purchase another home?
Yes. Qualified borrowers may have HECM or proprietary reverse mortgage options that can be used toward the purchase of a new principal residence.
What happens to the reverse mortgage when I die?
The loan generally becomes due after the last eligible borrower dies or another maturity event occurs. The estate or heirs then address the loan according to the applicable program and loan terms.
Can my heirs keep the house?
Potentially. The available options depend on the reverse mortgage program, outstanding balance, property value, estate circumstances, and applicable repayment requirements.
What is the biggest tradeoff?
Because interest and applicable loan charges accrue over time, the reverse mortgage balance generally increases and remaining home equity can decrease. That tradeoff should be considered alongside the financial benefit the homeowner receives from accessing the equity.
How do I know which reverse mortgage is best?
Start with your objectives rather than a particular product. Age, home value, existing mortgage balance, desired proceeds, property type, location, future housing plans, and legacy goals can all influence which options deserve consideration.
Related Resources
Which Reverse Mortgage Strategy Fits You?
Let's look at your age, home value, existing mortgage, equity, retirement goals, future housing plans, and legacy considerations, then compare the reverse mortgage options available to you.
Review Your Reverse Mortgage Options