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In your current area 100 homeowners are currently utilizing reverse mortgages to better enhance their retirement years, with 500,000 nationwide!

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The minimum qualifying age for a reverse mortgage is 55

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From America's #1 Rated Reverse Mortgage Lender

Reverse Mortgage FAQs

This guide addresses frequently asked questions (FAQs) about reverse mortgages, covering everything from the foundational aspects to the qualifications needed, how it affects your estate and heirs, and the financial implications, including taxes and interest rates.

Whether you’re considering a reverse mortgage to enhance your retirement income, manage your financial future, or explore your options, these insights aim to clarify the process, benefits, and considerations to ensure you’re well-equipped to navigate this financial decision.


ARLO presenting reverse mortgage FAQs


What is a Reverse Mortgage?

A reverse mortgage is a national program available to homeowners aged 62 and older, offering access to your home’s equity without needing monthly mortgage repayments.  To qualify, you must continue to occupy your home as your primary residence and keep up with property tax and homeowners insurance payments.  The most widely recognized reverse mortgage program is the Home Equity Conversion Mortgage (HECM), insured by the Federal Housing Administration (FHA).  For a straightforward explanation, read our popular post titled “How Reverse Mortgages Work? Explained in Simple Terms.

How Much Can You Qualify for With a Reverse Mortgage?

The amount you can qualify for with a reverse mortgage depends on the age of the youngest spouse and the appraised value of your home.  Generally, the loan-to-value (LTV) ratio offered in a reverse mortgage ranges from 40% to 60% of your home’s appraised value, varying according to your age and current interest rates.  Curious about how much you could qualify for? Use our Reverse Mortgage Calculator now to get a personalized quote.

Does the Bank Take Title to My Home If I Take a Reverse Mortgage?

No, the bank does not take ownership of your home when you secure a reverse mortgage.  You retain the same ownership and title as you hold today.  A reverse mortgage is simply a loan, similar to any other mortgage, with the added feature of allowing the deferral of interest charges instead of requiring mandatory monthly repayments.  You have the option to pay the interest, refinance, or sell your home at any time without facing any penalties.  You will receive a monthly statement detailing your interest charges and the activity on your available line of credit.  Ultimately, the Federal Housing Administration (FHA) insures your loan for your lifetime.  Thanks to HUD’s reverse mortgage insurance, you are assured that if your lender goes out of business in the future, your loan will be transferred to another servicer, and loan terms will remain honored for your lifetime.  Your line of credit or payment plan will always be accessible to you, and you can continue living in your home, provided you keep up with property tax and insurance payments, no matter how long you live or how much your home’s value appreciates.


When Must a Reverse Mortgage Be Repaid?

A reverse mortgage must be repaid when you sell the property, cease to occupy your home as your primary residence for 12 months or more, or fail to keep up with property taxes and homeowners’ insurance.  Additionally, upon the passing of the last surviving borrower, the reverse mortgage becomes due and payable.  Typically, your heirs or estate will have up to six months to refinance the home if they choose to retain it or up to 12 months to sell it.


What Does the Reverse Mortgage Lender Expect from Me?

The lender expects you to pay the property taxes, homeowners’ insurance, and any homeowners association dues.  Additionally, you are required to continue occupying the property as your primary residence.


Can I Keep the Title in a Trust If I Get a Reverse Mortgage?

You can maintain the title in a trust when obtaining a reverse mortgage.  However, both the lender and the title company will need to review the trust to ensure it meets their approval criteria.  If your title is held in a trust, it’s important to inform your loan officer early in the process so they can review the trust documents promptly, preventing any surprises later.  Most trusts are structured with lender requirements in mind, so they typically do not present a problem, but it is best to know as early on as possible.


Can I Get a Reverse Mortgage If I Already Have a Loan on My House?

You are not required to own your home outright to qualify for a reverse mortgage.  The funds from a reverse mortgage can be used for any purpose, but it is mandatory to pay off any existing liens on the property at the closing of the reverse mortgage.  If the amount from the reverse mortgage does not fully cover your existing loan, you can still obtain the reverse mortgage by supplementing it with additional funds from another source.  This way, you will not have to make any more house payments.


Will My Heirs Still Receive an Inheritance If I Get a Reverse Mortgage?

Yes, after the balance of your reverse mortgage is paid off, any remaining equity in the home will be passed on to your heirs.  Prior to closing your loan, you will be provided with an amortization schedule, allowing you to track the principal balance of your loan year by year.  The amount of equity left for your heirs will depend on various factors, such as the amount of money you withdraw, the length of time you remain in your home, the appreciation value of your home, and the interest rates, especially if your loan has a variable interest rate.


What Is the Downside of a Reverse Mortgage?

The primary downside of a reverse mortgage is that it involves using what has often been a significant part of the inheritance traditionally left to heirs.  As life expectancies change, the pattern of working until age 62 and passing away by 70, leaving behind an estate with a fully paid-off mortgage for heirs, is becoming less common.  Nowadays, people live longer and require additional sources of income during retirement, as social security benefits are often insufficient to meet all their needs.  While reverse mortgages can be an excellent tool for retirement planning, many older Americans find it beneficial to discuss this option with their families early in the decision-making process.  Most family members are not in a position to financially support their elderly relatives, and likewise, many parents find themselves in similar situations.  Reverse mortgages are thus seen as beneficial for providing financial security in retirement, but open communication with family members is highly recommended.  For more insights, see “Here are the Downsides of a Reverse Mortgage in 2024.


What Are the Credit and Income Qualifications for a Reverse Mortgage?

No minimum credit score requirements exist to qualify for a reverse mortgage loan.  However, lenders must conduct a credit analysis, paying particular attention to your payment history over the last 24 months.  As part of the reverse mortgage agreement, you are required to keep up with property taxes and homeowners’ insurance payments.  Consequently, lenders also verify that you have a minimum residual income in accordance with the FHA financial assessment guidelines to ensure you can meet these obligations.


How Do I Determine if a Reverse Mortgage Is Right for Me?

Determining whether a reverse mortgage is suitable for you involves several considerations.  Given the costs associated with the loan and the government insurance, a reverse mortgage might not be the best option if you only need the loan for a very short period.  However, if you plan to remain in your property for a long time and prefer not to make any more payments while still accessing your home’s equity through monthly payments, a line of credit, or both, a reverse mortgage could be an ideal solution.  It’s important to understand how a reverse mortgage works and consider your long-term financial goals and living arrangements before making a decision.  Further research or consultation with a financial advisor could provide more insights into how a reverse mortgage operates.


How Can I Use the Reverse Mortgage Proceeds, and Are There Any Restrictions on Their Use?

One significant benefit of a reverse mortgage is the flexibility it offers in receiving the proceeds.  There are no restrictions on what you can use the funds for, providing great freedom.

Your options include:

  • A lump sum: Receive all your funds at once.
  • Monthly payments: Opt for a steady stream of income.
  • A credit line: Access funds as needed, with the unused portion growing monthly.
  • A combination: Mix any of the above options to suit your needs—lump sum, credit line, and monthly payments.

This flexibility allows you to tailor the reverse mortgage to fit your financial situation and goals.


What Are the Interest Rates for Reverse Mortgages?

Interest rates for reverse mortgages vary depending on the program.  For instance, within HUD’s Home Equity Conversion Mortgages (HECM) loans, options include fixed rates, monthly adjustable rates, or annual adjustable rates.  Adjustable-rate programs provide more flexibility in how you can receive your funds, offering choices such as a line of credit or a monthly payment plan.  In contrast, fixed interest rates are typically associated with a single disbursement lump sum option.

Although the Federal Housing Administration (FHA) sets the maximum fees a lender may charge, lenders have the discretion to apply their interest rates to your loan balance.  Therefore, shopping around for the best terms is recommended, just as you would with any other type of mortgage.  Comparing current interest rates from various lenders can help you find the most favorable terms.


What Are the Closing Costs for a Reverse Mortgage?

The closing costs for reverse mortgages can vary significantly from one lender to another.  Companies that engage in expensive national advertising campaigns often featuring paid celebrities, may have higher closing costs to cover these additional expenses.  However, depending on your loan amount, there is a possibility that closing costs can be reduced or even entirely waived when setting up your reverse mortgage loan.

Shopping around and comparing interest rates and closing costs between different lenders is essential.  Additionally, ensuring your lender’s credibility is crucial; checking their standing with the Better Business Bureau and comparing customer reviews can provide valuable insights into their reputation and service.


Will I Pay Taxes on the Reverse Mortgage Funds?

Funds from a reverse mortgage are considered nontaxable, as the money received is not earned.  However, it’s always best to consult a trusted tax advisor to understand how a reverse mortgage may impact your tax situation.


Is the Interest Added to My Balance Tax Deductible on a Reverse Mortgage?

The interest added to the balance of a reverse mortgage becomes tax deductible only when a payment is made towards the loan or when the balance is paid off in full.  For more detailed information on deductions and how they might be affected by tax reforms, it’s advisable to consult with a tax professional or research the latest tax regulations.


Can I Make a Payment Back on a Reverse Mortgage?

Yes, although a reverse mortgage does not mandate regular monthly payments, borrowers are allowed to make voluntary partial or full payments towards the loan.  Importantly, there is no penalty for paying down or fully paying off your loan at any time.


What If the Loan Balance Exceeds the Value of Our Home From a Reverse Mortgage?

In the case of a Home Equity Conversion Mortgage (HECM), which is insured by the Department of Housing and Urban Development (HUD), there’s a safeguard in place.  You and your heirs are guaranteed not to have to pay more than the property’s value in a bona fide sale at the time the loan matures.  This type of protection is part of what’s known as a non-recourse loan, which means that the lender cannot seek repayment from any of your or your heirs’ other assets in the event the home’s sale does not cover the full balance of the loan.


Why Do Available Proceeds Vary From Lender to Lender?

The available proceeds from a reverse mortgage can vary between lenders because each lender sets its own rates and margins for its products.  While the basic structure of reverse mortgages, especially Home Equity Conversion Mortgages (HECMs) insured by the HUD, may be similar, the specific fees and margins that lenders add can differ.  This variation can affect the total amount of funds available to the borrower.  Therefore, comparing multiple lenders is beneficial to ensure you get the best terms for your reverse mortgage.


Will Reverse Mortgage Proceeds Affect Social Security or Medicare?

Proceeds from a reverse mortgage will not affect public benefits such as Social Security or Medicare.  However, they may impact eligibility for “need-based” programs, such as Medicaid or Supplemental Security Income (SSI).  This distinction is important for individuals relying on or planning to apply for need-based assistance.  For more detailed information on how a reverse mortgage might affect Medicaid and SSI eligibility, it’s advisable to consult with a financial advisor or research guidelines specific to those programs.


What Is a Reverse Mortgage Counseling Certificate?

A reverse mortgage counseling certificate is a document you receive after attending a counseling session with a certified reverse mortgage counselor.  This session is tailored to the specific reverse mortgage program you’re interested in, whether it’s the government-backed Home Equity Conversion Mortgage (HECM) program or a private proprietary product.  Counseling can be conducted either face-to-face or over the phone.  Lenders can provide you with the names and contact information of counselors who can offer the necessary counseling for the product you’re considering and assist you in scheduling your appointment.  Upon completing the counseling, you’ll receive this certificate, which your lender will require before proceeding with your loan application.  The purpose of the certificate is to ensure that you have a thorough understanding of reverse mortgage loans in general and the specifics of your chosen program.  You might want to visit our counseling locator page for a list of counseling agencies, including their current turnaround times and pricing.


What Do I Need to Provide to My All Reverse Mortgage Specialist?

To proceed with your reverse mortgage application, you will need to provide the following documents to your All Reverse Mortgage specialist:

  • A copy of your driver’s license or another form of picture ID.
  • A copy of your Social Security card.
  • A copy of the Declaration Page of your Homeowners Insurance Policy.
  • Copies of your Mortgage Statement(s), if applicable.  Provide all statements if you have more than one mortgage.
  • A copy of your Trust document if your property is held in a trust.
  • A copy of the Power of Attorney document if someone else will be signing on your behalf.
  • Conservator information, if you have a court-appointed Conservator.
  • Bankruptcy discharge papers, if applicable.

All Reverse Mortgage is recognized as the first lender to offer an automated prequalification engine online.  By completing their secure and encrypted intake form, you will be automatically pre-approved, and a detailed list of loan conditions will be provided to you.

Author Michael Branson
About the Author, Michael G. Branson |
Michael G. Branson CEO, All Reverse Mortgage, Inc. and moderator of ARLO™ has 45 years of experience in the mortgage banking industry. He has devoted the past 19 years to reverse mortgages exclusively.