How to Get a Reverse Mortgage if You Still Owe on Your Home

May 2, 2022

In this article, you’ll learn:

How to eliminate your monthly forward mortgage payment with a reverse mortgage
What expenses you’ll still be accountable for after eliminating your mortgage payment
How can you still make payments whenever you choose
How to get the best deal & highest principal lending limit

The ability to tap into the value of your home by turning its equity into cash can be a powerful tool for someone trying to find a way to expand their financial options for a whole host of reasons. This can naturally lead to questions that could apply to someone’s previously existing traditional or ‘forward’ mortgage.

One of those major questions can be:

If I still have a traditional mortgage I haven’t paid off, can I get a reverse mortgage?

Not only can you potentially get a reverse mortgage if you still have an outstanding traditional mortgage, but you might be surprised to learn that one of the major reasons a senior even bothers with a reverse mortgage in the first place is to eliminate their previously-existing forward mortgage payment.

A Home Equity Conversion Mortgage takes the first lien position on the property, so any other mortgages must be paid off to close the reverse mortgage.

The key has enough home equity to qualify.

For some, this means a home that is paid off in full. For others, it may just be having a mortgage balance that is low enough relative to the value of the home.

How Much Equity is Required for a Reverse Mortgage?

2024 Reverse Mortgage Age Chart

Age of Borrower	Principal Limit Factor	Current Lending Limit
62	35.7%	$1,149,825
65	37.8%	$1,149,825
70	41.5%	$1,149,825
75	44.3%	$1,149,825
80	48.8%	$1,149,825
85	54.9%	$1,149,825
90	61.8%	$1,149,825

*Principal Limit Factors taken from HUD.gov using an example expected rate of 6.060%. To arrive at your NET principal limit, you must deduct reverse mortgage costs, including upfront insurance (approx. 3%). PLF tables source: https://www.hud.gov/sites/documents/august2017plftables.xls

The burden of a forward mortgage payment for retirees

Forward, or “traditional,” mortgage payments represent a severe financial burden for anyone who has one, whether for new homeowners still in the middle of their working lives or seniors in or nearing retirement.

Still, having a traditional mortgage payment in retirement tends to hit seniors much harder than their younger counterparts because seniors often live on a fixed income from accounts like 401Ks or IRAs and Social Security benefits.

Many seniors can only count on their Social Security benefits, making the burden of a forward mortgage more painful to bear.

More financial peace of mind

Replacing your forward mortgage with a reverse mortgage means the need to make that monthly forward mortgage payment is gone. Reverse mortgages do not require monthly mortgage payments as long as you live in the home as your primary residence and maintain it in line with the guidelines presented by the Department of Housing and Urban Development (HUD).

Staying current on your property taxes and homeowners’ insurance would be best. Leveraging a reverse mortgage can allow you to relieve a lot of financial stress by saying goodbye to the constant necessity of needing to make your monthly mortgage payment.

Eliminating that part of your monthly expenses can allow you to plan ahead for other unexpected fees if they come up or free up more cash for you to do other important things.

Still, want to make payments? You can.

Because a reverse mortgage is a “negatively amortizing” loan, its balance grows over the life of the loan. Like with any loan, interest accrues over time. Some people do not know that even once a reverse mortgage is in place, you can still make payments toward the loan balance.

Borrowers always have the option to make payments as they would like if they are able. Some borrowers who work on commission, such as Realtors, even approach the reverse mortgage to make payments when they receive commissions.

This enables them to keep the loan balance lower than if they made no payments.

Pro Tips

Before signing up for any reverse mortgage, pay close attention to the lender’s closing costs and interest rates! Sadly, many seniors apply with celebrity advertisers seen on TV when they should be shopping multiple sources for the best deal.

Shop the Rate

Reverse Mortgage lenders set their own margins and interest rates. The lower the interest rate at the time of application, the more cash proceeds become available to YOU! This is one little-known secret to receiving the largest principal lending limit.

Ignore the Rhetoric

Ignore sales pitches that include “We’re the largest” and “We’re —–” Blah! FHA is the largest and the one that backs your federally insured loan, NOT the loan originator.

Take advantage of ARLO, the All Reverse Loan Optimizer, which can help you shop around for the best rates and products to find one that fits your financial situation best.

America's #1 Rated Reverse Lender Celebrating 19 Years of Excellence.

TALK TO OUR HUMAN EXPERTS TOLL FREE: 800-565-1722

LAUNCH REVERSE MORTGAGE CALCULATOR

22 Comments on this Article

Jack H.
November 9th, 2023

Hello Arlo. I'm not in a position to need one at this time but I'm 62 and my wife is 60. My question: Is it a hard fact that in order to qualify for a reverse mortgage I need to have paid off 50% of the mortgage already? My wife does have student debt and the only thing we are behind on is taxes. We come up a bit short on those every year but have never missed a payment on existing payment arrangement for years. Our credit ratings are excellent.
Reply to Jack
- ARLO™
  November 15th, 2023
  
  Hello Jack,
  
  The amount you receive with a reverse mortgage can change if HUD changes its Principal Limit tables, if interest rates change, and based on the age of the borrowers. At 62, at the Expected rate of 3% (the floor rate), the Principal Limit starts at 52.4% for a 62-year-old borrower (but with a 60-year-old spouse, that would be reduced to but at the current rates, that percentage goes down to 51.1%), but at the current interest rates, that percentage drops significantly (between 30% and 33%). The reason I say "between", is because since the rate is over the floor rate, most increases in rate will decrease the proceeds available to the borrower, whereas any rate below 3% will not make more funds available to the borrower since that is the floor rate).
  
  HUD has lowered the floor rate twice in the past 13 years. They moved from 5.5% to 5% in 2010. This didn't have too much impact on borrowers, but in 2017, HUD made many changes to the program, one being that they lowered the floor to 3%, meaning that when rates are higher than 3%, borrowers receive less money. Rates remained low, and the change didn't affect many borrowers nearly as much as feared when the change was initially announced.
  Unfortunately, we are in a completely different market plagued by rising interest rates, and the amounts that many reverse mortgage borrowers can receive under the program are vastly reduced. We wrote on this back in 2017 and before because we felt that HUD and Congress were doing a knee-jerk reaction to the mortgage market meltdown and the subsequent losses sustained from 2010 - 2014 and that they didn't give the changes they made a chance to take effect. Now, those higher floor rates are stifling many borrowers' ability to get the loan.
  
  The good news is that if you can work with the lower loan available, it might still be beneficial to get the loan, even at the higher rates. The higher rate means that the line of credit also grows at a higher rate. If the rates come back down, you can always consider refinancing later if more funds are available at lower costs. If you are refinancing a reverse mortgage for the first time, your initial mortgage insurance will most likely be considerably less and possibly at no additional cost (it depends on the value of your home at that time versus the value when you did the first loan).
  
  Remember, though, refinances are not guaranteed. You and the property must qualify under the terms in effect at the time of your proposed refinance. But no one knows what future values will be, and with the line of credit that grows on the unused balance, now might still be the best time to lock in your loan at the current market value and let the available limit grow at the current high rates (especially if you don't have to use a lot of the loan in the early years because you don't accrue interest owed on any funds you haven't used yet).
  Reply to ARLO
Marsha M.
November 5th, 2023

Hi Arlo,

I am 68 and took out a reverse mortgage (RM) after shopping around with great rates in 2019 after going on disability. I paid the RM down to owe only $55. Then, three months later, due to a red-light-runner totaling my car of 18 years, needing a new gas furnace, and having to upgrade my shower in 2022, I now owe $33,700 on the reverse mortgage. (I owed $40,000 nine months ago, but I've been paying it down.) I wish I knew what my expiration date was so I could finance my life according to when I will die. (Don't we all?). So my question is...

Since the interest rate is the same for the balance that I can borrow from ($210K) and for the amount I owe ($33.7K), do I need to pay down the amount I owe to a balance of $50 (to keep the RM active)? What happens if I stop paying it down? Won't the amount that I can borrow from ($210K) be growing at a faster rate than the amount I owe ($33K)---even if I have to borrow a bit more over the next 10 - 30 years (should I live that long) and I stop paying it down? (Granted, not paying it down means less to borrow from as the interest rate on $210K vs on $243K means a slower rate of growth on the principal/the amount I can borrow from).

I think I'll stick with molecular biology and designing DNA-based diagnostic assays for genetically based and infectious diseases using polymerase chain reaction amplification and fluorescently tagged allele-specific primers on microarray chips---that is simpler! :-)

Thank you! :-)
Reply to Marsha
- ARLO™
  November 9th, 2023
  
  Hi Marsha,
  The line of credit grows on the unused portion of the line based on the current interest rate plus the MIP renewal rate. So, just for argument's sake, let's say that your current line available is $200,000 and your interest rate is currently 7% with MIP renewal of 0.5%. Your line of credit growth rate is now 7.5% on the unused portion of your line ($200,000).
  We're going to keep this simple for now and not going to do any compounding. One year's growth is $15,000 on this example, and at the end of the year, your line of credit is now $215,000 (of course, it doesn't work this way because rates change and the amount moves monthly, but this is a simple example). If the balance you owe is just $33,700, the approximate interest plus MIP that would accrue for that year would be $2,528.
  The answer to your question is that yes, the growth is definitely greater than the interest that you are accruing because both the interest accrual and the line of credit growth occur at the same rate, and the unused line is much greater than the balance you owe. The more you borrow, the greater you (or your heirs) will ultimately owe when the property is finally sold to pay off the loan. There is no expiration date on the loan. As long as you continue to live in the property and pay your taxes and insurance in a timely manner, you can keep the reverse mortgage active. However, if you ever pay the balance down to zero, then the loan would be paid in full and closed. Keep this in mind if you want to keep the loan active and are paying it down. Keep a balance of $1500 or so on the loan so that it is not closed by accident (you accidentally overpay and pay the loan in full).
  But if you stop paying the loan down, the interest will accrue on the balance owed causing the amount you owe to increase, but the unused line of credit will still rise, giving you more money available as well (minus any funds you draw). We have an Excel calculator that we designed that allows you to put in your own rates, draws, and repayments to see how different draws, repayments, and interest rate scenarios will affect your loan. If you would like to run your own numbers and you have the Excel program on your computer and wish to see how it will affect your loan, contact michael@allreverse.com and request the program for your loan. He will need some initial information to set it up for you, but after you have the program started, you can alter the information to see how your loan will react to different scenarios.
  Reply to ARLO
Kasey S.
December 28th, 2022

My parents are retired and owe more than 50% on their home. Can they use a home equity loan to bring that percentage down to qualify?
Reply to Kasey
- ARLO™
  December 31st, 2022
  
  Hello Kasey,
  They can use a gift from other family members, but they cannot use other financing. The loan does not allow for other financing to remain on the property and can be the only loan/lien at the time of closing.
  Reply to ARLO
Mike
April 26th, 2022

I already have a reverse mortgage. Can I still borrow money on the equity of my home?
Reply to Mike
- ARLO™
  May 2nd, 2022
  
  Hello Mike,
  
  You may be able to refinance the current reverse mortgage and get more money, but you would need to be able to qualify under current terms.
  The reverse mortgage does not prohibit you from getting another loan behind your reverse mortgage but most lenders are hesitant to lend in a lien position behind a reverse mortgage because they know there is no payment required on the reverse mortgage and that balance can continue to rise and therefore, their loan to value will be higher than when they started if the homeowner takes additional funds from their reverse mortgage or just continues to accrue interest on the loan while not making payments on the outstanding balance.
  If you qualify for the refinance of the reverse mortgage, then you can utilize the new terms and continue making no payments so most borrowers with reverse mortgages look to refinance their existing loans first (and in all honesty, I think that is the easiest path because finding a lending source willing to lend behind a loan whose balance increases is not an easy task).
  Check us out our HECM refinance calculator if you would like us to review your circumstances to see if you qualify to refinance your loan with a new reverse mortgage with higher limits.
  Reply to ARLO
Mark
January 11th, 2022

Hi Arlo,

I'm not really clear on this if you can help me please: if my home is appraised for $200,000 and I have an existing regular mortgage of $100,000; do I have to pay off the existing mortgage balance from the reverse mortgage funds I will receive? It would probably be the only way I would be able to pay off the original mortgage balance in full. Thank you!
Reply to Mark
- ARLO™
  January 11th, 2022
  
  Hello Mark,
  
  Yes, any liens/mortgages must be paid in full at closing and the reverse mortgage would be the only loan remaining on the property at that time. This means that you must be able to receive enough funds to pay for the cost of the loan and to pay off all current loans/liens on the property or you would need to bring cash in to close the loan if you still wanted to close the reverse mortgage to eliminate your monthly mortgage payments.
  Reply to ARLO
Rowleen P.
October 25th, 2021

We owe $126,000 on our forward mortgage and we have a home equity down for $47,000 and we are behind on two house payments, how does this work for us?
Reply to Rowleen
- ARLO™
  November 2nd, 2021
  
  Hello Rowleen,
  
  Borrowers who have had late payments on their current mortgages or their other property charges (Taxes, insurance, HOA dues, etc.) in the past 24 months can still get a reverse mortgage but HUD now requires them to get a Life Expectancy Set Aside LESA (or Lee Sah) to pay their taxes an insurance from their loan proceeds. Which means for you to qualify under HUD's current financial assessment guidelines, you would need to have enough equity in the home to pay off the existing loans and fund the LESA.
  The LESA will set funds aside so that the lender can pay your taxes and insurance as they come due. It is actually not a bad deal for borrowers as long as you have the equity to fund the account because the loan funds are not considered borrowed until the lender actually uses them to pay for the charges due (in other words, send them to your tax assessor or your insurance company).
  You don't accrue interest on those funds until they are used for your charges and you don't have to worry about coming up with the money to pay those charges, they lender will pay them from the funds set aside. If you pay the loan off early (i.e., move and sell the home), you never used those funds and so you are not required to repay that portion of the loan.
  
  You need to contact your lender and let them know that you are currently delinquent on your mortgage payment so they will know that a LESA will be required and they will be able to review your circumstances to see if the sales of similar houses in the area tend to support a value that would indicate that you have sufficient equity to fund the LESA as well as pay off your current loans.
  The LESA amount depends on your ages and the amount of your charges (taxes and insurance) so the only way to know for sure is to have a lender run your numbers to see if they will work. It would have been much better to do so before you became due for two payments so if this is what you think you need to do, I would advise that you not wait much longer.
  Reply to ARLO
Leon K.
December 17th, 2020

I have a mortgage, can I still get a reverse mortgage?
Reply to Leon
- ARLO™
  December 17th, 2020
  
  Hello Leon,
  
  The home does not need to be paid off to get a reverse mortgage but any loans on the property now would need to be paid in full with the reverse mortgage proceeds so that the reverse mortgage is the only loan on the property after it closes.
  Reply to ARLO
Paula W.
June 18th, 2020

I want do a reverse mortgage but I still owe on $59,000 on my loan . Would still be able to get a good amount of cash?
Reply to Paula
- ARLO™
  June 18th, 2020
  
  Hi Paula,
  
  The amount for which you are eligible would depend on the value of the home, your age and interest rates at the time. Rates are low right now so that is in your favor.
  The only way to determine what you could expect to receive would be to visit our online calculator, plug in a little information (we don't need your social security number or any sensitive information -if you don't want to use your actual date of birth just pick a date close by so the calculator can accurately determine your benefits) and then you can decide from there if you want to go any further.
  Reply to ARLO
  - Ella
    July 9th, 2023
    
    I owe approx. $260,000 on my mortgage, and my home was appraised at $950,000. How would the reverse mortgage work in my case?
    Reply to Ella
    - ARLO™
      July 12th, 2023
      
      Hello Ella,
      Your reverse mortgage would pay off the existing loan first. Then any other proceeds would be available according to HUD's program parameters. Your age would dictate the amount, and you would be limited at closing and in the first 12 months. Then the remaining funds would be available after that time. To know the exact funds available, we could prepare a proposal for you, or you could visit our calculator at https://reverse.mortgage/calculator for a no-hassle, no-obligation proposal at any time.
      Reply to ARLO
Carmen
May 17th, 2019

My grandma took $50,000 out of her reverse mortgage and wants to gift it to us to purchase a home. Can we use that money?
Reply to Carmen
- ARLO™
  May 17th, 2019
  
  Hello Carmen,
  
  Your Grandmother can do anything she wants with the funds from her reverse mortgage. It is her home and her equity; she can use the proceeds for any purpose she wishes.
  We have had several borrowers over the years who got the loan for this very purpose. One such couple said they did not want to wait until after they were gone for their family to be able to use some of their inheritance, they wanted to see what good they were able to do and enjoy watching them use it.
  The one thing that I would caution is that there may be restrictions regarding gift funds on your side that require the sourcing of the funds from the donor and so you may want to verify on your end what those requirements are in advance but your grandmother is fine with her loan.
  Reply to ARLO
Jane C.
May 15th, 2019

If a home is paid in full, no outstanding loans of any kind with joint but unequal ownership (25% & 75%) and both owners are over 62, is a reverse mortgage still possible and how would it work? Example: Jane age 68 owns 75% and Dan age 64 owns 25% of the home. Both names are on the title.
Reply to Jane
- ARLO™
  May 15th, 2019
  
  Hello Jane,
  
  This is a very interesting situation and it brings up a few issues that borrowers need to know, consider and possibly plan for in advance. Firstly, you are eligible for the reverse mortgage even if you are not married and you do not have equal ownership rights to the property.
  But even though you may have different ownership interest in the home, you cannot restrict loan funds unequally. Therefore, the loan can be closed but you can't make it so that the 75% owner has access to 75% of the loan funds while the 25% owner has access to just 25% of the loan. Both borrowers have full and equal access to the loan proceeds.
  
  The next thing you need to know is that the loan is still valid and remains in place if at least one of the original borrowers is still living in the home as their primary residence. What this means is that if one owner passes and their ownership interest is passed to his/her heirs, the loan will still be in good standing with the remaining borrower and will still be accruing interest at that time.
  The equity in the home will be affected by the remaining borrower still living in the home which could change things drastically by the time the heirs ultimately inherit their ownership. The equity could rise if the interest accrual was minimal and the values continued to rise, it could be wiped out with a downturn in values combined with interest accrual for many years if the passing of one borrower was considerably sooner than the other. The possibilities are endless.
  
  If you choose to put some agreement in place regarding the forced sale of the home if one should pass, that is completely apart from the reverse mortgage. The reverse mortgage has no such provision and would be valid if at least one borrower is still in the home. No one knows what the future will bring, and such an agreement could leave the remaining owner, especially the minority owner, without a place to live at some point.
  This is one of those times when you can do the loan, but you really need to decide if you should do the loan, and if so, under what conditions. If you decide to proceed, I would advise that you consult with family members who may be affected later and an attorney so that you know all the possible issues in advance, that any agreements are in writing and enforceable.
  Reply to ARLO

STILL OWE? NO PROBLEM.

ARLO™

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