What if I still owe money on a first or second mortgage?
You may still be eligible. In fact, many people refinance their existing mortgage(s) with a reverse mortgage in order to substantially reduce their monthly bills. Proceeds from your reverse mortgage would first be used to pay off any existing mortgage(s). This means the balance of your existing mortgage(s) will be added to the balance of your reverse mortgage.
How much money can I get?
The specific amount depends on several factors, including:
- Your age
- The type of reverse mortgage you select
- Current interest rates
- Appraised value of your home
- Federal Housing Administration (FHA) lending limits
- Appraised value of your home
HUD also regulates the amount of money that can be withdrawn during the first year of your reverse mortgage. This is to help preserve your home equity for a longer period of time.
Click here to discover how much you may qualify for.
How can I receive the funds from a reverse mortgage?
One of the major benefits of a reverse mortgage is its flexibility, including a number of choices for how you receive your funds:
- Lump sum
- Monthly advances (either for a fixed length of time, or as long as you live in the home)
- Line of credit (take funds when you need them)
You can also choose a combination of methods|| — whatever best meets your financial needs.
How is a reverse mortgage different from a traditional home equity loan or home equity line of credit (HELOC)?
With a traditional home equity loan or HELOC, you must make mandatory monthly principal and interest payments on the balance while you live in the home. A reverse mortgage has a flexible repayment feature. You can pay as much or as little as you like each month toward principal and interest, or make no monthly loan payment at all.
As with any mortgage, you must meet your loan obligations, keeping current with property taxes, insurance, and maintenance.
Check out this side-by-side comparison chart to learn more.
Can I refinance my existing mortgage, home equity loan, or other debts with a reverse mortgage?
Yes. For many homeowners 62 and older who are looking to refinance their mortgage(s) or consolidate debt to reduce their monthly bills, a reverse mortgage can be a more suitable solution. That’s because a reverse mortgage has a flexible repayment feature, which puts you in control of how much you pay toward your principal and interest each month. For as long as you live in the home, you can choose to pay as much as little as you like, or make no monthly loan payment at all — freeing up money for other purposes. As with any mortgage, you must meet your loan obligations, keeping current with property taxes, insurance, and maintenance.
Will I be taxed on my reverse mortgage proceeds?
Typically, reverse mortgage loan funds are not subject to income tax. Contact your tax advisor for additional details.
Will a reverse mortgage affect my government benefits?
The funds from a reverse mortgage generally do not affect regular Social Security or Medicare benefits. However, needs-based benefits, such as Medicaid and Supplemental Security Income (SSI), may be impacted. Please contact a financial professional or government benefits specialist about your particular situation.
How can I use the proceeds?
Use the proceeds for the things you need and want. Some examples of how borrowers in my home state are using funds include:
- Refinancing an existing mortgage(s) to improve cash flow
- Consolidating debts to reduce monthly bill payments
- Buying a home
- Making home renovations
- Funding home health care
Can I use a reverse mortgage to purchase a home?
Yes, with the HECM (Home Equity Conversion Mortgage) For Purchase loan, qualified borrowers can use their loan proceeds to buy a home that better suits their needs and lifestyle. It’s a home financing option that can make it easier for buyers 62 and older to afford the home they want, while preserving more of their savings.
Are interest rates fixed or variable?
Reverse mortgages are available with either fixed or variable rates. Borrowers who elect a fixed-rate loan will receive their funds as a single disbursement lump sum. A lump sum disbursement is also available with an adjustable rate. A line of credit and monthly advances have an adjustable rate.
Can a reverse mortgage be refinanced?
Yes, refinancing is possible. This option may be to your advantage if your home increases in value, making more funds available.
Will I have to pay any fees?
With the exception of a fee for government-required reverse mortgage counseling, most of the fees associated with a reverse mortgage can be financed with your loan, so there’s no immediate out-of-pocket cost. The costs are added to the loan amount (“principal”) and paid along with the accrued interest when the loan becomes due. Depending on the loan option you choose, these fees may include an origination fee, closing costs, a mortgage insurance premium (required for HECM loans) and a monthly servicing fee.
What has to be repaid when the loan becomes due?
You’ll repay the loan balance, any fees that have been added, and the accrued interest. Homeowners (or their heirs) usually choose to do this through the sale of the home or other assets. Repaying the loan by refinancing through a conventional mortgage is also an option. The non-recourse feature of the loan ensures that you’ll never owe more than the home is worth when the loan is repaid.
When will the principal and interest charges become due?
The loan must be paid in full when one of the following occurs:
- A “maturity event” — the loan becomes due and payable when the home is sold, or the borrower or qualified non-borrowing spouse no longer occupies the home as their principal residence (e.g., passes away, moves out)
- You fail to pay property taxes or homeowners insurance.
- You let the property deteriorate beyond what is considered reasonable wear and tear, and do not correct the problem.