Can I qualify with a low credit score?

Yes, you can still qualify for a reverse mortgage with a low credit score. Instead of focusing on your credit score, lenders look at your ability to pay ongoing property costs like taxes and homeowners insurance. If you've had credit issues but stayed current on these payments, you’re likely to qualify. In some cases, lenders may require you to set aside funds to cover future property expenses.

Do I need to make payments on a reverse mortgage, and can I pay it off early?

No monthly mortgage payments are required as long as you live in your home and pay property charges like taxes and insurance. However, you can make voluntary payments to reduce your loan balance, and there are no penalties for paying off the loan early. You can use your own funds, another loan, or sell the home to pay off the reverse mortgage at any time.

Can I sell my house with a reverse mortgage?

Yes, you can sell your home at any time without penalty. The loan balance will be paid off using the proceeds from the sale, and any remaining equity is yours to keep.

How is a reverse mortgage paid back?

The loan is repaid when you sell the home, move out, or pass away. If your heirs inherit the property, they can either pay off the loan to keep the home or sell it to cover the balance. If the loan balance exceeds the home’s value, heirs can repay it at 95% of the appraised value, and the mortgage insurance covers any shortfall. "Moving out" typically means you no longer occupy the home as your primary residence. This includes living elsewhere for more than 12 consecutive months or moving into a long-term care facility. If you permanently leave the home, the loan becomes due, and the property is usually sold or refinanced to repay the balance.

What are the disadvantages of a reverse mortgage, and when might it not be a good idea?

Some disadvantages include: Primary Residence Requirement: The home must remain your primary residence. Higher Upfront Costs: Reverse mortgages often have higher closing costs due to mortgage insurance and fees. Impact on Inheritance: Using home equity reduces what’s left for heirs. If you plan to move soon, a reverse mortgage may not be the best option due to its upfront costs, which are designed for long-term homeowners. Learn more about the potential downsides of a reverse mortgage.

How Reverse Mortgages Work: Explained in Simple Terms!

Q: Who owns the house with a reverse mortgage?

You remain the owner of your home, just like with a traditional mortgage. A reverse mortgage is simply a loan secured against your property. You do not give up ownership when you get a reverse mortgage.

Q: Is an appraisal required?

Yes, an appraisal is mandatory for all reverse mortgages. The appraiser determines your home’s value and ensures it meets HUD’s property standards for safety and livability. Any major issues, like roof damage or plumbing problems, must be addressed before the loan can proceed.

Q: Can you lose your home with a reverse mortgage?

Yes, but only if you fail to meet the loan requirements, such as paying property taxes, maintaining homeowners insurance, or living in the home as your primary residence. If these obligations aren’t met, the loan may become due.

November 28, 2024

Michael G. Branson Edited by

Cliff Auerswald 20 comments

Introduction to Reverse Mortgages

Welcome to our guide on reverse mortgages! In this article, we will explain reverse mortgages in simple terms. Whether you are a homeowner thinking about your financial future, a family member helping someone understand their choices, or just curious about how reverse mortgages work, this guide is for you.

We cover the basics – from who can get a reverse mortgage to how repayment works – to help you decide if a reverse mortgage is right for you.

Table of Contents

• Introduction to Reverse Mortgages

• What is a Reverse Mortgage?

• Reverse Mortgage vs. Traditional Loans

• How Reverse Mortgages Compare to Other Loan Types

• How Much You Can Get From a Reverse Mortgage

• How Age Affects Your Principal Limit

• Exploring Reverse Mortgage Payment Options

• How the Line of Credit Growth Rate Works

• Lump Sum Payouts: Fixed Rate Draw Requirements

• #1 Tip: Finding the Best Interest Rates and Closing Costs

• #2 Tip: Evaluating Reverse Mortgage Costs vs. Benefits

• Frequently Asked Questions

• Key Takeaways on Reverse Mortgages

What is a Reverse Mortgage?

A reverse mortgage is a special home loan for homeowners aged 62 and older that lets you turn your home’s equity into cash without monthly payments. You can receive the money as a lump sum, regular monthly income, or in flexible amounts when you need it. The loan and interest are repaid only when you sell your home, move out permanently, or pass away.

Reverse Mortgage vs. Traditional Loans

A reverse mortgage differs from traditional loans because it works in the opposite way. With a traditional loan, you make monthly payments to reduce the amount you owe, increasing your property equity over time.

In contrast, a reverse mortgage doesn’t require regular payments. Instead, as you receive money and interest accrues, the loan balance grows, and your equity in the property decreases.

With a reverse mortgage, there are no monthly payments or prepayment penalties. Depending on your financial goals, you can choose to repay some or all of the interest or any amount you want.

How Reverse Mortgages Compare to Other Loan Types

Feature	Reverse Mortgage	Traditional Mortgage	HELOC	Shared Appreciation
Eligibility Age	62+	18+	18+	18+
Monthly Payments	Optional	Required	Required	Optional
Loan Purpose	Access home equity	Home purchase or refinance	Access home equity	Access home equity, investment
Interest Rates	Fixed or variable	Fixed or variable	Variable	N/A
Loan Repayment	Upon moving out, sale, or death	Over loan term (e.g., 30 years)	After draw period (typically 10 years)	Upon sale or end of term
Equity Depletion	Optional	No, builds equity over time	Yes	Yes, at sale or term end
Credit Line	Yes	No	Yes	No

This table highlights the key features of reverse mortgages compared to traditional options. Understanding these differences can help you choose the right solution for your needs.

How Much You Can Get From a Reverse Mortgage

The amount of money you can get from a reverse mortgage usually ranges from 40% to 60% of your home’s appraised value. The older you are, the more you can receive because loan amounts are based on your age and current interest rates.

Several factors determine the loan amount:

The age of the youngest borrower
The value of the home or the 2025 lending limit (whichever is less)
The current interest rates

Other factors that affect the loan amount include:

Costs to obtain the loan (these are subtracted from the available loan amount)
Existing mortgages and liens (these must be paid off)

Any remaining money after these deductions belongs to you.

You can use our easy-to-use calculator to find out how much you can receive from a reverse mortgage.

How Age Affects Your Principal Limit

To get a HECM reverse mortgage, you must be at least 62 years old. The Principal Limit, or the maximum amount you can borrow, is based on the age of the youngest borrower. The program uses life expectancy to estimate how long borrowers will accrue interest.

If there are multiple borrowers, the loan amount is based on the youngest person’s age. This is because all borrowers can live in the home for the rest of their lives without making payments.

Generally, younger borrowers can accrue more interest over their lifetime than older borrowers. Therefore, an 82-year-old borrower would start with a higher Principal Limit than a 62-year-old borrower with the same terms.

However, there are exceptions, but this is the general principle.

Exploring Reverse Mortgage Payment Options

There are several ways you can receive funds from a reverse mortgage:

Cash Lump Sum at Closing: Receive all the money at once.
Line of Credit: Draw money as you need it.
Term Payment: Receive a set amount of money for a specific period.
Tenure Payment: Receive guaranteed payments for as long as you live in your home.

You can also customize these options to fit your needs by combining them. For example, a married couple in California, born in 1951 and owning a $500,000 home, might choose a reverse mortgage with the following plan:

Receive $100,000 at closing to improve their property and fund their grandchild’s college plan.
Set up a monthly payment of $1,000 for four years until they begin receiving a larger social security benefit.

This plan leaves them with an additional $125,000 available in a line of credit, which grows at a guaranteed rate if unused.

How the Line of Credit Growth Rate Works

In the past, many viewed reverse mortgages as a last resort. However, let’s consider a savvy borrower planning for future needs. She has enough income for now but is worried about needing more money later.

After covering loan costs, she gets a reverse mortgage with a $200,000 line of credit. The unused portion of this line of credit grows at the same rate as the interest and mortgage insurance premiums that would have accrued if she had borrowed the money.

As time passes, her credit line increases. This means that if she needs more funds in the future, they will be available to her.

If interest rates remain the same, her available credit would look like this:

10 years: $350,000
15 years: $500,000
20 years: $660,000

If interest rates increase by 1% in the third year and another 1% in the seventh year, her available credit after 20 years would be more than $820,000.

It’s important to remember that this is not income; it’s a loan. If you borrow the money, you owe it, and it will accrue interest. You or your heirs must repay it when the property is sold.

However, having between $660,000 and $820,000 available in 20 years is a significant financial resource.

Lump Sum Payouts: Fixed Rate Draw Requirements

With a fixed-rate reverse mortgage, you must take the total amount of money available at the loan’s closing. You cannot leave any funds for future draws because a fixed rate does not allow future draws.

Due to higher tax and insurance default rates, HUD changed the rules when borrowers took 100% of the funds upfront. Now, borrowers do not have access to 100% of the Principal Limit at the close of the loan.

This change helps prevent financial difficulties by ensuring that borrowers have funds available over time rather than all at once.

ARLO shopping around for the best interest rates and closing costs.

#1 Tip: Finding the Best Interest Rates and Closing Costs

To find the best rates and closing costs, you need to shop around and compare all aspects of the offers, not just a few fees. For example, choosing a lender with a slightly lower appraisal fee might seem like a good deal, but if that lender charges a margin that is 0.50% higher, it can cost you tens of thousands of dollars in interest over the life of the loan.

It’s essential to look at the overall picture. Consider your goals and how long you plan to stay in your home. If your goal is to preserve equity, focus on finding a loan with the lowest interest margin, even if it has slightly higher upfront fees. On the other hand, if you want the highest line of credit growth, a higher margin may be more beneficial, as it grows at a higher rate.

Educate yourself about the different options and what they mean for your financial situation. Understanding your long-term and short-term goals will help you choose the best reverse mortgage for your needs.

#2 Tip: Evaluating Reverse Mortgage Costs vs. Benefits

Reverse mortgages are not for everyone. If the loan does not meet your needs and you will still struggle financially, you need to recognize that before using your home equity. If the loan won’t make your life easier and you might need to sell your home in a few years, consider selling now instead of eroding your equity. Making that move now can prevent more difficult decisions later.

A reverse mortgage is intended to be the last loan you ever need. If you know you are not in your forever home, consider using a reverse mortgage to buy the right house instead of using it as a temporary fix, which might not be a proper solution at all. Most borrowers benefit when they research and plan carefully. Understand how these loans work, what your plans are, and which options best achieve your goals.

Frequently Asked Questions

Who owns the house on a reverse mortgage?

When you take out a reverse mortgage, you remain the owner of your home, just like with a traditional mortgage. The reverse mortgage is simply a loan secured against your property. You do not give up ownership to get a reverse mortgage.

How much money can I get from a reverse mortgage?

The amount of money you can get from a reverse mortgage depends on three factors: 1. Age of the Youngest Borrower: The older you are, the more money you can get. 2. Current Interest Rates: The lower the interest rates, the more money you can get. 3. Home’ss Appraised Value: The value of your home also affects the amount you can borrow. These factors together determine the Principal Limit Factor, which is the percentage of your home’s value you can borrow.

How is the loan amount of a reverse mortgage determined?

The amount you can borrow through a reverse mortgage is calculated based on guidelines from HUD (the Department of Housing and Urban Development). This calculation considers several factors: the value of your home, current interest rates, and your age. These factors help determine how much money you can receive from the loan. Additionally, the amount you currently owe on any existing mortgages is considered to decide how much money you can get in the first 12 months of the loan.

Can you get a reverse mortgage with a low credit score?

Yes, you can still qualify for a reverse mortgage with a low credit score. Unlike traditional loans, your credit score isn’t a major factor for approval. However, your credit history is still important. Lenders will examine your ability to pay ongoing property taxes, homeowners insurance, and other home-related expenses. If you’ve had past credit issues but have kept up with your property taxes and insurance and haven’t had major recent problems, you’ll likely qualify for a reverse mortgage. The Department of Housing and Urban Development (HUD) sets these guidelines, so as long as your income and home meet their requirements, you can move forward. If you’ve been late on taxes or insurance payments in the last two years, you may still qualify, but the lender may ask you to set aside money for future payments. Even with recent credit challenges, getting a reverse mortgage is possible, but you may need this special set-aside to cover your taxes and insurance.

Is an appraisal required for a reverse mortgage?

Yes, an appraisal is required for every reverse mortgage. The appraiser is essential as the eyes and ears for both the lender and HUD (Department of Housing and Urban Development). The appraisal determines the value of your home and checks for any issues that could affect the loan’s security. HUD has specific property standards, and an on-site appraisal is the only way to confirm that your home meets these requirements. The appraiser will also ensure that your home is safe and livable to qualify for the loan. During the appraisal, the appraiser will walk through your home, turn on faucets, check the attic, and note any potential issues like roof damage, foundation cracks, plumbing leaks, or exposed wiring. While the appraiser isn’t a contractor, they will point out any major concerns they notice. This ensures your home meets HUD’s minimum property standards and can qualify for the reverse mortgage.

Do you still make a payment of some kind on a reverse mortgage?

As the homeowner, you are responsible for your taxes, insurance, and any other assessments on your property (i.e., HOA dues, if any). No mortgage payments are due for as long as you live in the home as your primary residence, but you can choose to make a payment at any time. There is no prepayment penalty with a reverse mortgage, so if you want to pay a payment in any amount, you may do so without penalty, but none are required as long as you live in the home and pay the property charges on a timely basis.

Can I sell my house if I have a reverse mortgage?

Yes, if you have a reverse mortgage, you can sell your house anytime without penalty.

Is there a penalty if I pay off my reverse mortgage early?

No, there is no penalty for paying off a reverse mortgage early. You can repay part or all of the loan anytime without any extra charges. You can use your own money, take out another loan, or even sell your home to pay off the reverse mortgage. It’s important to remember that you always own your home—you’re not “buying it back” from the lender when you repay the loan. Some homeowners choose to make voluntary payments on their reverse mortgage. While payments aren’t required, paying down the loan can help reduce the balance or pay it off sooner, depending on your plan. If you decide to start making payments but stop later, there’s no penalty because no monthly payments are required in the first place.

How does a reverse mortgage get paid back?

A reverse mortgage loan is paid back when it reaches maturity or if the homeowner decides to sell their home or pay it off through other means. When a reverse mortgage borrower passes away, the heirs to their property can either pay off the balance to keep the property or sell the home to pay off the loan balance. If an heir inherits the property with a balance that exceeds the current market value, they can choose to pay the loan in full at 95% of the current market value, even when that is less than the amount owed.

What happens if I outlive the total value of my home?

If you outlive the value of your home, you can still stay in the property as long as you continue to pay your property taxes and homeowners insurance and maintain the home. The loan balance and your home’s value won’t affect your ability to remain in the home. A reverse mortgage is a non-recourse loan, which means neither you nor your heirs will ever owe more than the home is worth. When you pass away or move out, your heirs can keep the home by paying off the loan at either the amount owed or 95% of the home’s current market value, whichever is less. If they choose not to keep the home, they can walk away without owing anything, even if the home’s value is less than the loan balance. If the home sells for less than the loan balance, the mortgage insurance you paid for will cover the difference, and the lender cannot ask your estate or heirs for more money. The insurance ensures that your loved ones are protected from any shortfall.

Can you lose your home with a reverse mortgage?

Yes. When taking a reverse mortgage, you agree to maintain property charges, such as taxes and homeowner’s insurance, and occupy your home as your primary residence. (Defined by leaving at most six months). If you fail to maintain the loan agreement, HUD requires the servicer to call the loan due and payable. (Also See: 5 Ways To Lose Your Home With a Reverse Mortgage)

What are the disadvantages of a reverse mortgage?

Reverse mortgages have a few key drawbacks. One significant limitation is that the property must be the borrower’s primary residence. If you decide to move out and wish to keep the property as a rental, you must either refinance the reverse mortgage or pay it off entirely. Additionally, reverse mortgages often entail higher closing costs compared to traditional loans. This expense increase is primarily due to the mortgage insurance required for HUD-insured Home Equity Conversion Mortgages (HECMs), making it a costlier option upfront.

Why should you not get a reverse mortgage?

You might reconsider getting a reverse mortgage for several reasons, especially if you plan to sell your home soon. Reverse mortgages are intended as long-term financial solutions, not short-term fixes. The upfront costs, including mortgage insurance and other fees, can be substantial. These expenses can outweigh the benefits if you sell your home or move shortly after getting a reverse mortgage. Because of these initial costs, a reverse mortgage may not be the best choice for homeowners who don’t plan to stay in their home for a long time. If you’re looking for a quick financial solution or expect to move soon, it might be worth exploring other options before committing to a reverse mortgage.

Is a reverse mortgage a good idea?

Whether a reverse mortgage is a good idea depends on your individual circumstances and long-term goals. It can be a great option if you plan to stay in your home for the rest of your life and want to use your home equity to improve your financial situation. A reverse mortgage can provide extra funds to help you live more comfortably during retirement. However, if you’re considering moving later in retirement, it’s worth exploring other options like a reverse mortgage for purchasing a new home or different home equity loans. The key is assessing your future plans and financial needs before deciding if a reverse mortgage is right for you.

Key Takeaways on Reverse Mortgages

Reverse mortgages allow seniors to borrow against the equity in their homes without making monthly mortgage payments. The most common type is the Home Equity Conversion Mortgage (HECM), insured by the Federal Housing Administration.
To qualify, you must be at least 62 years old, and the Principal Limit is based on the age of the youngest borrower.
The funds available are determined by the youngest borrower’s age, the home’s value, and current interest rates.
The loan must be repaid when the last surviving borrower dies, permanently leaves the home, or stops paying property taxes or homeowner’s insurance.
A reverse mortgage never has a payment due or a prepayment penalty. Any remaining equity goes to the borrower’s heirs or beneficiaries.

What is a Reverse Mortgage & How Does it Work - Explained by ARLO™

ARLO also recommends these helpful resources:

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Have a Question About Reverse Mortgages?

Look no further. Michael G. Branson, our CEO, brings a wealth of knowledge directly to you. With a robust 45-year tenure in mortgage banking and 20 years dedicated solely to reverse mortgages, he's the expert you want on your side.

Post your question in the comments below and anticipate a personalized response from Mr. Branson himself, typically within one business day. He's here to illuminate all angles of reverse mortgages, ensuring you're equipped with the knowledge to make informed decisions. Take this opportunity to gain insights from a seasoned professional.

20 Comments on this Article

Stacie
May 13th, 2024

Can we get a reverse mortgage if our house is appraised at $650,000 and we owe $398,000?
Reply to Stacie
- Michael Branson
  May 13th, 2024
  
  Hi Stacie,
  Thanks for your question! The amount you can receive from a reverse mortgage depends on three key factors: the value of your home, the age of the youngest borrower, and the current interest rates.
  Given the higher interest rates we're seeing today, the amount available is typically less than it might have been a few years ago when rates were lower. To get a specific idea of what you could qualify for, I recommend using our free online calculator. It's easy to use and you don't need to provide sensitive information like social security numbers.
  Also, keep in mind that if inflation decreases and interest rates drop, your potential benefits from a reverse mortgage could improve. Although you generally can't refinance a reverse mortgage within the first 18 months unless there's an extreme need, it's something you might consider later if the conditions become more favorable and both you and your property qualify.
  While there's no guarantee of being able to refinance in the future, many borrowers have found it beneficial when the circumstances were right, depending on changes in interest rates and property values.
  Reply to Michael
Melissa F.
April 29th, 2024

I'm looking for options for my parents. They have a house worth about $100,000, but it's getting hard for them to keep it up. Housing is very high in our area, so if they move, they would need to buy something worth about $200,000. Could they do a reverse mortgage on the new house they would buy?
Reply to Melissa
- Michael Branson
  May 5th, 2024
  
  Hello Melissa,
  Yes, you can use a reverse mortgage to purchase a property. The buyers will need to determine how much money they will net from selling their current home. Additionally, whether they have any extra funds to use alongside the sale proceeds will dictate how much house they can afford.
  Once they know the total funds available, they can use a HECM purchase calculator to estimate how much house they can buy. You can also look at the houses currently for sale to see if this option would be feasible for them.
  Reply to Michael
Jeff S.
March 7th, 2023

Hello ARLO,

I don't understand the mechanics of how a reverse mortgage works in relation to the line of credit and funding. I understand that there's a lender, a servicer, an insurer, and a pool of loans, and I am quite sure it all works just fine and is secure. Still, I have no idea what role your company plays other than origination, how I interface with the servicer (if at all), where the money resides until future takedowns on my part, and where that money comes from and goes to the GNMA pools, and when, nor whom HUD is insuring. I'm reading up on reverse mortgages and am looking forward to your explanation!
Reply to Jeff
- Michael Branson
  March 7th, 2023
  
  Regarding the actual mechanics, the loan is not "funded" into an account somewhere and then drawn on as the borrower needs funds. If that were the case, those funds that were unused would-be accruing interest from the start, and funds that have not yet been borrowed do not accrue interest by the borrower.
  
  The lender funds any future advances from their warehouse lines of credit, much like the initial loans are funded. As a GNMA issuer, the lender constantly issues new securities as they pool new loans they close. The future draws of existing loans give them the liquidity to continue to pay down their warehouse line of credit for additional loans and draws (as we do when we fund loans and then pay them down to fund new loans).
  
  Loans, including reverse mortgages, are assets on a lender's books. If a lender cannot continue to service the loan for any reason, those loans have a value that can be sold to other viable investors or, in the case of reverse mortgages, can be assigned to HUD if need be. At any rate, whether sold to another lender or assigned to HUD, future draws are handled the same way under the same terms, with new advances made from a warehouse line of credit and then new securities issued on an ongoing basis. With the full faith and credit of the US Government, borrowers are protected.
  
  This is important to stress because when borrowers choose to take a traditional line of credit from a bank (i.e., HELOC) or even a reverse mortgage from a proprietary or jumbo investor, those funds are not insured or guaranteed to be available. While it is true that you only ever owe what you borrowed, and if the investor of one of those products were to go bankrupt or freeze your line due to a loss of liquidity, etc., you would still only owe the money you actually borrowed and any accrued interest and not the entire line if you had not borrowed all of it. Still, you also have no guarantees on the private programs that those funds will be available.
  In other words, you don't lose money if the line were to disappear on those programs, but you do lose access to funds you thought you had secured if the program becomes insolvent (this happened recently on a jumbo line of credit program). Unlike the HUD-insured program, they do not have the full faith and credit of the US government to guarantee funding future draws.
  Reply to Michael
Donald S.
January 8th, 2023

This site gave me every thing I needed to know about making a decision on whether or not get a reverse mortgage, very well done. Thanks ARLO!
Reply to Donald
- Michael Branson
  January 12th, 2023
  
  Thanks Donald. We wish you the very best with your future endeavors!
  Reply to Michael
Paula W.
July 21st, 2022

Hello Arlo,

I own my home and a conservative value would be $250,000. I want to get less than $30,000 with a reverse mortgage. Would I still have to get an appraisal done and would the process still take up to 45 days?
Reply to Paula
- Michael Branson
  July 21st, 2022
  
  Hello Paula,
  
  Reverse mortgages work a little differently than forward loans. With a reverse mortgage, you receive a Principal Limit (maximum loan amount) for which you are eligible to draw and you can take any amount up to that maximum benefit any time over the life of the loan as long as you live in the home and meet the loan requirements (you live in the home as your primary residence and pay the property charges like taxes, insurance and HOA payments if any on time).
  
  So, let's just say for arguments' sake that you are eligible for a reverse mortgage in the amount of $150,000 but you only want to draw the $30,000 you mention. You would still have the same line available but you would choose the draw of $30,000 and that is the amount on which you would accrue interest (plus any costs you incur to get the loan).
  Just because you did not draw the remaining funds on the line immediately, they are still available to you for the life of the loan and in fact, the amount available in the line grows over time on the unused portion of the loan. It doesn't cost you anything if you never use it and it doesn't accrue interest owed on any unused portion of the line, but it is available to you.
  
  As such, the loan goes through the same process as every other reverse mortgage. It would require an appraisal pursuant to HUD requirements and the timing of the loan depends on where you are located, how quickly things come back to your lender when requested and whether or not there are any third-party delays (i.e., the appraisal takes longer, there are liens on title that must be removed, the property has repairs that are needed, etc.).
  Some loans are closed in 30 days or less, some take longer than 45 days when issues arise that are out of the lender's hands. But the loan amount will not affect the time it takes to close the loan as every loan must meet the HUD requirements to get the FHA insurance and it cannot close until all conditions are met.
  Reply to Michael
Kay N.
May 17th, 2022

Hello Arlo,

If I have a reverse mortgage and then the value of the home goes down in a few years do I still retain the original equity? Is a new appraisal ever required during the term of the reverse mortgage?
Reply to Kay
- Michael Branson
  May 17th, 2022
  
  Hello Kay,
  
  Your "equity" is dependent upon the value of the home in relation to the amount owed on the loan. So, you would most likely never retain the same equity. There are a number of things that could affect the amount of equity you have in the property. If the property value goes down, then the equity in the home would decrease, but that is the same with any loan or even if you had no loan at all. If the value goes up, your equity would increase. If you borrowed more of your line of credit, your equity could decrease but then, it might still increase if the value of the home increased more than the amount you borrowed and the interest that accrued.
  
  A simple way to look at this is if you have a home that is worth $200,000 and no loans on the home, you have $200,000 equity. If the house decreased in value by $50,000, you now have $150,000 in equity. In this example, you never borrowed a dime but with the decrease in value, you did not retain the same equity. On the other hand, if you borrowed $50,000 from a loan and your home also went down in value by $50,000, your equity is now $100,000 (this doesn't include any interest or other components to loans, just the principal withdrawals). But this would be true with any loan, not just a reverse mortgage. Your equity in the home is just the value minus any loans or liens outstanding against the property.
  
  With a reverse mortgage though, there are no future appraisals to determine if the value of the home is still at or above the original appraised value to determine if you can still access the original loan amount as is the case very often with loan products like Home Equity Lines of Credit (HELOC). Some credit programs do require additional appraisals later if they feel that the value has dropped and they can also freeze the line so that you no longer have access to the funds if they feel that the value has dropped on the home that secures the line. This is not the case with reverse mortgages and one of the reasons they make so much sense for so many people. They cannot be frozen or reduced later just when borrowers need them the most!
  Reply to Michael
Penny
December 30th, 2021

My husband is 62 but I am 59. We are both on the title and our home is paid for. Can we still do a reverse mortgage with him being the borrower? If not, can I transfer title to just him? If he passes first, would I still be able to stay in home as long as taxes are paid?
Reply to Penny
- Michael Branson
  January 11th, 2022
  
  Hello Penny,
  
  You're in luck. You do not need to transfer title to your husband, and you can get a reverse mortgage. You cannot be on the loan and would be considered a "eligible non-borrowing spouse".
  What this means is that your husband would be the borrower on the loan and if anything happened to him, you could continue to live in the home if you continue to pay the taxes and insurance in a timely manner and maintained the home in a reasonable manner (the same rules as for the borrower).
  The one downside that you need to consider is that as a non-borrower, if anything happens to your husband, you will not have access to the loan proceeds since you are not on the loan.
  
  Of course, if you used 100% of the funds from the start to pay off an existing loan or for a purchase, that would not make any difference as there would be no additional funds available anyway. Or if you and your husband were very good about not borrowing much of the available line you may be able to refinance the loan when you turn 62 with a loan that includes both of you at that time.
  The reason I say if you do not use much of the line is because your current reverse mortgage would be accruing interest and the ability to refinance with a 62 year old borrower with a higher loan amount (whatever you draw plus any interest you accrue) could depend on how much the property had appreciated in that time or if you had used too much money and accrued interest to where it did not make sense for you to refinance in 3 years.
  Reply to Michael
Gary T.
October 27th, 2020

With a reverse loan, can the borrower take any amount, or does it have to be the full percentage? In other words, if I own a house worth $100,000 can I borrow $15,000 even though I could probably borrow 3 or 4 times that? I do not need nor do I want the full amount.
Reply to Gary
- Michael Branson
  October 27th, 2020
  Hello Gary,
  
  The reverse mortgage offers several different options to access the available funds.
  Or you can mix the line of credit with the tenure or term options to have both a payment for life or of your choosing and that would be either a modified tenure or modified tenure. In your case, you could choose the line of credit option, draw the amount you want, and the other funds would remain in the line, available to you.
  
  If you never draw the money, you never accrue any interest on the funds and you, or your heirs do not need to repay them. You only pay back what you use (plus any interest that accrues on those funds).
  In addition, the line of credit grows in availability on the unused funds over time. This means that the longer you have funds available on the line, the more money will be available to borrow later should you need them.
  Again, if you never need them you are not required to repay them but if you ever do need them for any reason, they are always available unlike a Home Equity Line of Credit that the bank can close at their discretion or that goes into a repayment period after 10 years.
  Reply to Michael
Rhonda S.
July 25th, 2020

Can you do this on a home paid? I want to make improvements to sell and move to smaller home.
Reply to Rhonda
- Michael Branson
  July 27th, 2020
  
  Hello Rhonda,
  Yes, you can but I need to be honest with you. This is meant to be the last loan you will ever need, and the costs of a reverse mortgage are not low because of the mortgage insurance charged by HUD.
  Because there are no payments required, the loan is not inexpensive due to the added risk to lenders, investors. If you plan to only keep the loan for a short while, I would recommend that you look into alternative forms of financing that would be much less costly and that you would pay off when you sold the home.
  Perhaps for your repairs you could consider a Home Equity Line of Credit if the payments are manageable since you plan to pay it off as soon as the repairs are complete, and you sell the property?
  You could always consider a reverse mortgage for the purchase of your next home so that you can keep more of your cash or buy more home but I don't recommend you use the reverse mortgage for temporary financing.
  Reply to Michael
Cathy C.
July 7th, 2020

Can you get a reverse mortgage for $10,000? That is all I am needing, thanks!
Reply to Cathy
- Michael Branson
  July 7th, 2020
  
  Hello Cathy,
  
  The reverse mortgage sets the amount of the benefit for which you qualify based on your age, your property value, program parameters and interest rates at the time. This is your Principal Limit on the loan, you do not request a set loan amount based on any other factors.
  That does not mean that you must take the entire amount for which you qualify though. You can get a line of credit and choose to draw whatever amount of the line you desire so even if you had a line available of $100,000 based on the HUD calculations, you can choose to take only $10,000 and you accrue no interest on the remaining $90,000 that you did not borrow.
  
  But I would encourage you to look at other options if you do not think you would ever need more than just the $10,000. A reverse mortgage is not the least expensive form of financing available with the HUD insurance and if you only plan to use this amount, I do not believe it would be worth paying the costs for the loan for this amount (especially if you live in an area like Florida where the closing costs are also high).
  I would suggest you investigate an Equity Line of Credit or possibly a family loan if possible if this is the only amount you will ever need. If there is a chance you may need another $10,000 or more at multiple future times, then a reverse mortgage might be a good option for you or if you are also paying off a current loan but as I stated, it you are looking for only one draw of $10,000, this is not the option I would recommend.
  Reply to Michael

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The minimum qualifying age for a reverse mortgage is 55

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