Reverse mortgages can be a helpful financial tool for many seniors, but the requirements can sometimes be a bit confusing.  It’s 2024, and some requirements have changed.  Knowing the current guidelines is important if you’re over 62 and considering a reverse mortgage.

That’s why we’ve compiled an easy-to-understand guide on the five basic rules for reverse mortgages.  We want to ensure you have all the information you need to make the right choice.

To fully understand the ins and outs of the reverse mortgage, homeowners should remember and be aware of the following:

ARLO teaching the 4 Rules for Getting a Reverse Mortgage

Key Criteria for Qualifying

Borrower Age RequirementBorrowers must be at least 62 years old.
Primary ResidenceThe property must be the borrower's primary residence.
Equity RequirementBorrowers must have substantial equity in their home (typically at least 50%).
Financial AssessmentLenders conduct a financial assessment to ensure the borrower can afford taxes, insurance, and home maintenance.
Loan RepaymentThe loan becomes due when the borrower sells the home, moves out, or passes away.
Counseling RequirementBorrowers must undergo counseling from a HUD-approved agency.
Property EligibilityEligible properties include single-family homes, FHA-approved condominiums, and certain manufactured homes.
This table provides a concise overview of the primary rules associated with reverse mortgages, including borrower age, primary residence requirements, equity requirements, financial assessments, loan repayment terms, counseling requirements, and property eligibility.

#1.  Limit on How Much You Can Borrow with a Reverse Mortgage

It would be nice to borrow as much money as you need, but the government limits the amount you can borrow with a reverse mortgage.

The maximum amount for a reverse mortgage, officially called a Home Equity Conversion Mortgage (HECM), is currently $1,149,825.  But remember, not everyone can borrow this full amount.

The amount you can borrow depends on a few things:

  • The age of the youngest homeowner or eligible spouse who isn’t borrowing
  • The value of your home, but only up to $1,149,825
  • The interest rates at the time you apply

These rules make sure the borrowing amount fits your situation and protects you and the lender.

#2.  Required Counseling for a Reverse Mortgage

Getting a reverse mortgage can greatly help your retirement planning, but first, you must complete a mandatory counseling session to ensure you understand all the details and responsibilities involved.

In the counseling session, you’ll meet with an independent counselor who will explain everything about the reverse mortgage or HECM loan.  They’ll answer any questions you have about how it works and what’s involved.

You’ll learn that even after you get a reverse mortgage, you still need to keep up with certain expenses for as long as you have the loan:

  • Property taxes
  • Homeowners Association fees, if applicable
  • Home Insurance

You’ll also learn that you cannot have any overdue federal debts to qualify for a reverse mortgage.  Some examples of federal debt include:

  • Student loans
  • Direct loans from the government
  • Loans insured by HUD (the Department of Housing and Urban Development)
  • Loans from the Small Business Administration

Once you’ve completed the counseling, you’ll receive a certificate that you need to include with your loan application.  This ensures that you’ve been properly informed before you make any decisions.

#3.  Qualifying Property Types for a Reverse Mortgage

To be eligible for a reverse mortgage, there are specific property requirements your home must meet.

Firstly, you should either own your home outright or have only a small mortgage left that the reverse mortgage can pay off.  It’s also essential that you live in the home as your primary residence.

Now, let’s talk about what types of homes qualify:

  • The home must be a single-family house.  If it’s a multi-family property, you must live in one of the units.
  • Vacation homes or second homes do not qualify for reverse mortgages.
  • Manufactured homes and condominiums might be eligible, but they have specific criteria they need to meet.

Knowing these requirements can help you determine if your home qualifies for a reverse mortgage and if it’s a viable option for your situation.

#4.  Non-Borrowing Spouse Protections May Apply

A non-borrowing spouse (NBS) is not listed on the home title as a spouse and may be of any age.  This means they aren’t legally recognized as a borrower on a Home Equity Conversion Mortgage (HECM) reverse mortgage.  However, the Department of Housing and Urban Development (HUD) made changes in 2014 to offer better protection for non-borrowing spouses.

Under these guidelines, a surviving non-borrowing spouse may continue living in the home after the borrowing spouse has passed away, provided they meet certain conditions.  If your spouse isn’t on the home title and you’re considering a reverse mortgage, it’s crucial to discuss this with your lender and reverse mortgage counselor.

When taking out a reverse mortgage, senior homeowners should make sure that their spouse is involved in the transaction and included in the reverse mortgage contract.  This inclusion helps safeguard the spouse’s right to remain in the home should the borrowing spouse die.  This proactive step is essential for ensuring that both partners are protected throughout the term of the reverse mortgage.

#5.   Payment Options for Reverse Mortgages

Homeowners considering an adjustable interest rate reverse mortgage have several payment options to choose from:

  1. Line of Credit—You can make withdrawals as needed, either in installments or as unscheduled payments, at your discretion.
  2. Modified Tenure—This is a combination of a line of credit plus scheduled monthly payments for as long as one borrower lives in the home.
  3. Modified Term—Similar to Modified Tenure, this combines a line of credit with scheduled monthly payments for a predetermined number of months.
  4. Tenure—Offers steady monthly payments for as long as at least one borrower continues to live in the home.
  5. Term – Provides monthly payments for a set period defined in months.

For those opting for a fixed-interest rate reverse mortgage, the payment is typically received as one lump sum.  Among these options, the line of credit and tenure are particularly popular choices for homeowners, giving them flexibility in how they receive funds.

Senior homeowners looking to enhance their retirement income might find a reverse mortgage to be a valuable option.  This allows them to leverage their home equity to meet financial needs during retirement.

WARNING: Serious Consequences for Breaking These 3 Reverse Mortgage Rules

When you have a reverse mortgage, there are critical rules you need to follow to keep the loan in good standing.  These rules are clear and crucial for maintaining your loan:

  1. Occupancy
    • You must live in the home as your primary residence.  If you move out permanently or for more than a year, for example, to an assisted living facility or nursing home, the loan becomes due and must be repaid.
  2. Tax and Insurance
    • You must pay your property taxes and maintain a homeowner’s insurance policy each year.  These are standard requirements similar to those in a traditional mortgage.  If you fail to keep up with property taxes or insurance, the loan becomes due and payable.
  3. Maintaining the Home
    • The home must be kept in good condition.  This means following maintenance guidelines set by your loan servicer to ensure the home does not deteriorate.  Regular upkeep, along with staying current on taxes and insurance, will help you remain in good standing with your reverse mortgage and allow you to comfortably age in place.

Following these guidelines is not just about avoiding consequences; it’s about securing your ability to stay in your home and manage your finances in retirement.

Top FAQs


What are the basic rules of a reverse mortgage?

To obtain a reverse mortgage, you must meet the minimum age requirement, which in most cases is 62.  Some private reverse mortgage programs allow for borrowers as young as 55 in some but not all states.   The property must be the primary residence of the borrower(s) and remain the primary residence of at least one borrower for the duration of the loan to remain in good standing.  Additionally, the borrower(s) are responsible for paying their property taxes, homeowners insurance, and upkeep of the property as they would be for all other loan types.

What happens when someone dies with a reverse mortgage?

When the last original borrower or eligible non-borrowing spouse permanently leaves home due to incapacity or death (or any other reason), the loan becomes due and payable.  Borrowers or their heirs then have the right to repay the loan with funds available to them, or by refinancing the loan, they can sell the property and repay the loan with the sale proceeds, or they can walk away and owe nothing.  If the borrower(s) die and heirs wish to keep the home, but the mortgage balance is greater than the value of the home, the heirs can repay the loan in full for an amount equal to the amount owed or 95% of the current value of the home, whichever is less.

What are some specific requirements for reverse mortgages in California?

California is one of the few states that impose additional time on the front end, such as the right of rescission that borrowers have on the back, which is meant to give borrowers a “cooling off” period after counseling.  Lenders cannot begin processing a loan for a borrower for at least 7 days after borrowers have completed their counseling.  Regardless of whether HUD will allow a returning borrower to waive counseling within 5 years, the state of California will not, and all borrowers must attend counseling for each new loan.  Spouses and non-borrowing spouses must attend counseling.  In the state of California, the water heater must be double strapped.

What are some specific requirements for reverse mortgages in Texas?

In Texas, you cannot do a loan for a non-borrowing spouse, whether eligible or non-eligible.  The reverse mortgage loan must close within 180 days of counseling, or the borrower(s) must be re-counseled.  The Preliminary Title Report is valid for 90 days per Texas state law.  The lender must order a new, updated report if the loan does not close within that period.  Texas loans cannot close with a Life Estate interest in the property.  The loans in Texas also cannot close in the name of a trust.  Transactions must use an attorney to review the title and closing package, which is in the state of Texas.

What are some specific requirements for reverse mortgages in Florida?

Florida requires the charges of transactions that can add considerably to the loan costs in that state.  The state of Florida requires that each loan gets a copy of the survey or a signed survey affidavit.   Florida charges additional taxes such as Intangible Taxes and Documentary Stamp Taxes.  Although these are not lender fees, they are moving costs and getting new loans in Florida and must be considered.