What it is
A reverse mortgage, specifically a Home Equity Conversion Mortgage insured by the FHA, is available to homeowners 62 and older. It converts equity into cash without requiring a monthly mortgage payment.
You keep the title and you stay in the home. What continues are the obligations: the property must remain your primary residence, and you must keep property taxes, homeowners insurance, and required maintenance current. These are conditions of the loan, not suggestions, and failing them can make the balance due and payable.
The loan is repaid when the last borrower sells the home, moves out permanently, or dies. Because interest and insurance premiums accrue instead of being paid monthly, the balance grows over time and the equity left over shrinks. The loan is non-recourse, so neither you nor your heirs will owe more than the home is worth when it is settled through a sale. Proceeds are loan proceeds rather than income and are generally not taxed, but ask a tax adviser about your own situation.
Who it fits
- Homeowners 62 or older
- Borrowers with substantial home equity
- Retirees seeking income, a line of credit, or a lump sum
- Homeowners looking to retire an existing mortgage payment
How it runs
- 1CounselingHUD requires independent counseling from an approved agency before you can apply.
- 2ApplyThe application reviews age, equity, and your ability to keep paying taxes, insurance, and upkeep.
- 3AppraiseAn appraisal establishes current home value, which drives the amount available.
- 4CloseSign at closing and select your payout structure.
Questions
Do I have to make monthly payments?
No monthly mortgage payment is required, and you may make voluntary payments. You must still pay property taxes and homeowners insurance and maintain the home. The loan becomes due when the last borrower dies, sells the home, or lives away from it for more than 12 consecutive months, including a move into long-term care.
Could I lose my home?
Yes, if the terms are not met. The loan can be called due if you stop paying property taxes or homeowners insurance, let the property fall into disrepair, or stop using it as your primary residence. Those obligations run for the entire life of the loan.
What happens to my heirs?
The loan comes due when the last borrower leaves the home. Heirs may sell the home to repay the balance, keep it by repaying the balance or 95% of the appraised value, whichever is less, or transfer the property to the lender.
How much can I borrow?
It depends on the youngest borrower’s age, the home value, and interest rates. The balance grows over time, because interest and mortgage insurance premiums accrue rather than being paid monthly, which reduces the equity remaining for you or your heirs.
Other programmes
Fixed Rate Mortgage
A predictable rate and payment for the life of the loan.
FHA Home Loan
Government-insured loans with 3.5% down and flexible credit guidelines.
VA Home Loan
$0 down, no monthly mortgage insurance, reusable entitlement.
Rehab Loan
Finance the purchase and renovation of a home in a single mortgage.
USDA Loan
0% down loans for eligible rural and suburban homes.
Jumbo Home Loan
Financing for homes priced above the conforming loan limit.