Reverse Mortgages

A reverse mortgage is a loan secured by the home that allows an eligible homeowner to access equity without a required monthly principal and interest payment, as long as loan obligations continue to be met.

A HECM is the FHA-insured reverse mortgage program for eligible homeowners and requires HUD-approved reverse mortgage counseling before closing.

HECM borrowers must complete counseling with a HUD-approved reverse mortgage counselor before the loan can close.

Reverse mortgage borrowers must continue to meet loan obligations, including occupancy, property taxes, homeowners insurance, maintenance, and other required property charges.

A proprietary reverse mortgage is a private reverse mortgage program that is not the FHA-insured HECM program, so costs, protections, eligibility, proceeds, and servicing rules must be compared carefully.

A reverse mortgage set-aside can reserve loan proceeds to help pay required property charges when the review shows that extra protection is needed.

A non-borrowing spouse may have different rights and limits than a co-borrower, so the household should understand spouse status before closing.

The reverse mortgage process generally includes education, an early review, counseling, application, appraisal, final loan review, closing, and ongoing homeowner obligations.

Reverse mortgage borrowers should watch for pressure, confusing promises, contractor tie-ins, investment pitches, and anyone discouraging counseling or independent advice.

A reverse mortgage may be a poor fit if the homeowner plans to move soon, cannot maintain property charges, needs short-term cash only, or has a better lower-risk option.

A HELOC may fit borrowers who can qualify for and manage required payments, while a reverse mortgage may fit eligible older homeowners who need a different cash-flow structure and plan to remain in the home.