You'll understand how reverse mortgages work, what to expect during the process, and what to look for in a lender. You'll have the information you need to make informed decisions. Skip to main content. Office of Hospital Facilities Why Choose ? Overview of Lean Why Choose ?
How it Works - The difference between a reverse mortgage and a home equity loan - The various types of reverse mortgages - Fees and costs associated with reverse mortgages - Financial and tax implications Things to Consider - Are you 62 or older? Get the Answers You Need - The right reverse mortgage for you - Repayment of a reverse mortgage - What you need to know before shopping for a reverse mortgage - Services that can help you plan, budget and maintain your independence.
As you consider whether a reverse mortgage is right for you, also consider which of the three types of reverse mortgage might best suit your needs. Single-purpose reverse mortgages are the least expensive option. These loans may be used for only one purpose, which the lender specifies. For example, the lender might say the loan may be used only to pay for home repairs, improvements, or property taxes.
Most homeowners with low or moderate income can qualify for these loans. Proprietary reverse mortgages are private loans that are backed by the companies that develop them. If you own a higher-valued home, you may get a bigger loan advance from a proprietary reverse mortgage.
So if your home has a higher appraised value and you have a small mortgage, you might qualify for more funds. HECM loans can be used for any purpose. HECMs and proprietary reverse mortgages may be more expensive than traditional home loans, and the upfront costs can be high.
How much you can borrow with a HECM or proprietary reverse mortgage depends on several factors:. In general, the older you are, the more equity you have in your home, and the less you owe on it, the more money you can get. Before applying for a HECM, you must meet with a counselor from an independent government-approved housing counseling agency. Some lenders offering proprietary reverse mortgages also require counseling.
The counselor also must explain the possible alternatives to a HECM — like government and non-profit programs, or a single-purpose or proprietary reverse mortgage.
The counselor also should be able to help you compare the costs of different types of reverse mortgages and tell you how different payment options, fees, and other costs affect the total cost of the loan over time.
You can visit HUD for a list of counselors , or call the agency at With a HECM, there generally is no specific income requirement. However, lenders must conduct a financial assessment when deciding whether to approve and close your loan. If this is not required, you still could agree that your lender will pay these items. You are still responsible for maintaining the property. HECMs generally give you bigger loan advances at a lower total cost than proprietary loans do. In the HECM program, a borrower generally can live in a nursing home or other medical facility for up to 12 consecutive months before the loan must be repaid.
Taxes and insurance still must be paid on the loan, and your home must be maintained. With HECMs, there is a limit on how much you can take out the first year. Your lender will calculate how much you can borrow, based on your age, the interest rate, the value of your home, and your financial assessment. Generally, you can take out up to 60 percent of your initial principal limit in the first year.
There are exceptions, though. Decide which type of reverse mortgage might be right for you. That might depend on what you want to do with the money. Compare the options, terms, and fees from various lenders. Learn as much as you can about reverse mortgages before you talk to a counselor or lender. Is a reverse mortgage right for you?
Only you can decide what works for your situation. A counselor from an independent government-approved housing counseling agency can help. This is especially true if he or she acts like a reverse mortgage is a solution for all your problems, pushes you to take out a loan, or has ideas on how you can spend the money from a reverse mortgage.
For example, some sellers may try to sell you things like home improvement services — but then suggest a reverse mortgage as an easy way to pay for them. If you decide you need home improvements, and you think a reverse mortgage is the way to pay for them, shop around before deciding on a particular seller. Some reverse mortgage salespeople might suggest ways to invest the money from your reverse mortgage — even pressuring you to buy other financial products, like an annuity or long-term care insurance.
Resist that pressure. If you buy those kinds of financial products, you could lose the money you get from your reverse mortgage. Some salespeople try to rush you through the process.
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