Reverse mortgage programs are now available starting at age 55

Reverse mortgage opportunities are now opening up for individuals as young as 55, marking a significant shift in the industry.  Historically, proprietary or private reverse mortgages, often referred to as jumbo reverse mortgages, were primarily utilized for high-value properties exceeding HUD’s lending limits.  Initially, these private options were less favorable compared to HUD’s Home Equity Conversion Mortgage (HECM) program, especially since they offered a lower loan-to-value ratio.

However, the landscape has evolved considerably in recent years.  Private reverse mortgage loan amounts relative to home values have been steadily increasing, enhancing the appeal of these programs. Exciting developments have recently emerged in this sector, broadening the scope and accessibility of reverse mortgages.

Many prospective borrowers previously had to wait until turning 62 to qualify for the HUD program, often with concerns about rising interest rates affecting their potential loan amounts. Higher interest rates typically result in reduced funds available to borrowers.  Now, the opportunity to access reverse mortgage programs before age 62 presents a new avenue for these individuals, allowing them to consider reverse mortgages earlier than expected.

Beyond the advantage of age flexibility, this development brings additional benefits to borrowers, offering more choices and potentially more financial freedom in their retirement planning.

Benefits of Proprietary Reverse Mortgages

Proprietary reverse mortgages bring additional benefits, especially for those with specific housing situations, such as condominium owners. These private programs have their own set of approval criteria, which can differ from HUD’s guidelines. While not all condominium projects will qualify, those with units valued at $450,000 or more, which are not HUD-approved, may find a viable option in proprietary reverse mortgages.

The approval process for these private loans is distinct from HUD’s, often being perceived as more accessible by HOAs and condo boards, especially if there are reservations about HUD’s requirements.

A key advantage of proprietary reverse mortgages is their versatility. Borrowers aged 55 and over can use these loans for both refinancing and home purchases. This flexibility allows for the potential freeing up of cash assets or the elimination of the need for a monthly mortgage payment. Importantly, borrowers are free to pay any amount at any time without facing prepayment penalties.

These loans are also applicable for homes valued at or above HUD limits. In cases where the home’s value exceeds $2,000,000, two appraisals are required, but the program often covers the cost of the second appraisal.

However, it’s important to note that because these are private loans and not part of the HUD program, there may be variations in the features offered. For instance, options like the HUD tenure option, which provides payment for life, may not be available in proprietary programs. Therefore, it’s crucial for borrowers to understand the specific terms and features of each private reverse mortgage program to determine the best fit for their needs.

How Closing Costs Compare to Proprietary vs HECM Loans

When comparing the closing costs of proprietary reverse mortgages to traditional ones, there are several key differences to consider:

1. Mortgage Insurance: One of the most significant differences is that proprietary reverse mortgages do not require mortgage insurance.  This absence significantly reduces the overall cost of closing these loans compared to those that require mortgage insurance.
2. Lender Credits: Depending on the specific loan, borrowers might be eligible for lender credits that can cover some or even most of the closing costs.  The availability of such credits can vary based on the loan’s terms and the lender’s policies.
3. Location and Market Conditions: The ability of a lender to cover closing costs can also depend on the property’s location and the prevailing market conditions. This variability means that closing costs can differ from one region to another and from one time period to another.  Therefore, it’s advisable for borrowers to compare several lenders to understand the specific costs associated with their loans.
4. Interest Rates: Proprietary loans typically have higher interest rates compared to those with mortgage insurance.  However, the absence of upfront and annual mortgage insurance premiums in proprietary loans must be considered in this comparison.  This can make proprietary loans more cost-effective in the long run despite the higher interest rates.
5. Age Considerations: It’s important to note that HUD does not have a program available for individuals below the age of 62, making proprietary reverse mortgages the only option for younger borrowers.

The decision-making process should include an evaluation of a chart that outlines typical rates and the corresponding loan-to-value ratios available for different ages. This chart can provide a clear comparison and help borrowers understand how much they can borrow based on their age and the specifics of the loan they are considering.  This information is crucial for making an informed decision regarding the most suitable reverse mortgage option for their needs.

Age 55-60 Reverse Mortgage Loan-to-values (LTV)

ARLO recommends the following resources: 

• Reverse Mortgage Age Requirements for 2025
• Exploring 3 Types of Reverse Mortgages in 2025