Question from our reader:

“We have a reverse mortgage, but we were never told there was a reverse mortgage for veterans.  We have quite a bit of equity in our home.  Can we refinance our current reverse mortgage to a VA reverse mortgage?” 

ARLO says thank you to our Veterans

Understanding FHA and VA Loan Mechanisms

FHA and VA’s Indirect Role in Loans:  It’s important to clarify that neither the Federal Housing Administration (FHA) nor the Department of Veterans Affairs (VA) directly provides loans to consumers.  While the FHA, operating under the Department of Housing and Urban Development (HUD) umbrella, insures loans, the VA offers guarantees for a portion of loans.  However, the actual loan provision is the responsibility of private lenders, who then secure insurance and guarantees through these government entities.

The Elusive “Veterans’ Reverse Mortgage”

The Persistent Myth: Every few years, the concept of a “reverse mortgage for veterans” resurfaces in finance.  Despite numerous articles and the usage of various terminologies such as “Veteran’s Reverse Mortgage” or “Kosher VA Reverse Mortgage,” there still appears to be no concrete program that fits this description.  Specifically, a reverse mortgage loan tailored for veterans, adhering to distinct guidelines and backed by the VA, remains unseen.

Personal Research and Findings: In my continuous effort to stay informed, I recently revisited this topic, spurred by repeated queries and a personal commitment to lifelong learning (a fact my wife can attest to).  My investigation led me first to the U.S. Department of Veterans Affairs website, where they detail various lending programs available to U.S. veterans.

Available Programs and Warnings: The site offers information on various programs, including Purchase and Cash-out Refinance Loans, Interest Rate Reduction Refinance Loans (IRRRL), and even Native American Direct Loans.  However, conspicuously absent is any mention of VA-guaranteed Reverse Mortgages.  Intriguingly, a search for reverse mortgages redirects to a cautionary notice from the Consumer Finance Protection Bureau, in partnership with the VA.  This 2012 notice sternly warns against false advertising, particularly the crime of misleading veterans and older Americans with non-existent programs, with specific reference to reverse mortgages.

Staying Updated with Industry News: As a National Reverse Mortgage Lenders Association member, I am privy to regular updates on new and emerging programs.  If there had been any recent developments regarding a VA-backed reverse mortgage, it’s likely that this information would have reached our association.  Despite not being a VA-approved lender, I was confident in my knowledge of the industry’s latest offerings.

Common Misunderstandings Among Borrowers: It seems you’ve encountered what many borrowers have – notifications or advertisements using terms like “VA Reverse Mortgage.” However, it’s crucial to note that these often refer to the HECM program – Home Equity Conversion Mortgage – which is a HUD or FHA initiative, not a VA-backed program.

What the CFPB Says

Finally, I checked the Consumer Financial Protection Bureau’s website and found the answer I sought.

This was on the official government consumer protection site regarding this exact issue:

reverse mortgage advertisement for veterans

So, there you have it.

I am sorry to say that the VA does not offer the program you seek, so the answer to your question is no, you would not be able to refinance your current reverse mortgage with a “VA reverse mortgage.” Furthermore, if you get an ad from someone saying they have such a program, I suggest you immediately toss it in the trash because that’s where it belongs!

Veteran Mortgage vs. HECM Reverse Mortgage: A Detailed Feature Comparison

Compare FeaturesVeteran Mortgage (VA)HECM Reverse Mortgage
Borrower Minimum Age1862
Lending Limit$766,550$1,149,825
Income Requirements Full Documentation Limited
Credit Score660No Minimum
Reserves2-6 Months PITINo Minimum
Average Fixed Rate5.625% (6.08% APR)6.680% (8.094% APR)
Loan Duration15-Year, 30-YearFor Life
$0 Monthly Payment OptionNoYes
Low/No Closing CostsYesNo
Monthly Mortgage InsuranceNone.50% Monthly
VA Fixed Rate source: 5.625% (6.08%% APR) and 1.75% discount points on a 60-day lock period for a 30-Year VA Cash-Out



Does the VA offer reverse mortgages?

Currently (as of January 2024), the VA does not offer reverse mortgage loans.

Can you refinance a VA loan to a reverse mortgage?

Yes.  A reverse mortgage loan can be used to pay off any existing mortgage on the property if there are enough funds to do so.

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

Yes.  A reverse mortgage loan has no prepayment penalty, so you can sell your home anytime and pay off the reverse mortgage.

Would a military retired and disabled veteran be better off getting a VA guarantee equity home loan than a reverse mortgage?

Ultimately, the answer depends on you.  Which option aligns best with your needs and goals?  If you’re interested in a loan and are comfortable with making payments, or if leaving a substantial asset to an heir is your priority and eliminating monthly payments isn’t a goal, a home equity loan might be your better choice.  It’s less costly in the short term and provides immediate cash.  This option is worth considering if the repayment terms fit within your budget.  On the other hand, if you’re less concerned about leaving a mortgage-free home to your heirs—perhaps because they are financially independent or you have no heirs—and you’re looking for a way to access cash without the burden of monthly mortgage payments, thereby living more comfortably, a reverse mortgage could be the ideal solution.  This option is particularly appealing if you have an inconsistent income and anticipate a decrease in income or if managing another payment isn’t feasible.  Gather information for both scenarios, then decide which suits you and your family best.  Remember, with a reverse mortgage, while there’s no obligation to make payments, you have the flexibility to make payments of any amount, even paying off the loan in full without penalty at any point.  Unused lines of credit will grow over time, increasing your available amount.  Interest is only accrued on the funds you use, not on the unused credit line or its growth.

Can a reverse mortgage impact my ability to secure a VA loan?

Yes and No.  Having a reverse mortgage that you paid off in full would not impact your ability to apply for a VA loan later as a reverse mortgage is not a VA program and, therefore, does not use your VA benefits.  However, if you default on one government program and then apply for another, you may not be able to qualify due to credit requirements.  Additionally, a reverse mortgage and VA loans require the property to be your primary residence, so you could not have both simultaneously.

Can I use my GI bill (VA benefits) on a reverse mortgage?

The HUD/FHA-insured reverse mortgage loan is an FHA program, not a VA-guaranteed loan.  At this time, I am unaware of any VA reverse mortgage programs or plans in the works to begin one.  Therefore, unfortunately, your GI benefits cannot be used for this program.

Can I use my VA loan to repay my parent’s reverse mortgage?

While I can’t specify the loans you’re eligible for, if you are eligible and qualify for a VA loan as a refinance option for the property once the title is in your name, I see no reason why not.  The reverse mortgage becomes due and payable, and there are no stipulations from the reverse mortgage regarding the source of your financing.  Therefore, it’s a matter of meeting your VA lender’s requirements for the new loan.

Can I use a reverse mortgage to payoff my VA loan?

You can pay off a VA loan with a reverse mortgage.  The issue that usually makes this a bit tougher is that VA loans typically start at a higher loan-to-value, so it depends on whether your equity position in the property is high enough to qualify under the reverse mortgage terms.  But if so, there is no problem paying off a VA, FHA, or conventional loan with a reverse mortgage if the numbers work.

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