I’ve been in this business for a number of years and have talked with thousands of people about the HECM reverse mortgage. The following are some of the most common reverse mortgage FAQs (frequently asked questions) that I hear.
There is quite a bit of information in this article, so I’ve included the following table of contents to make it easier to navigate through the content. We’ve also included “Back to Top” links throughout the article so it’s easier to return to the top of the page. We hope you find this information helpful!
Who owns the house in a reverse mortgage?
This is one of the most common reverse mortgage FAQs I hear. Many seniors think the bank owns the house when you get a reverse mortgage. The HECM is simply a home loan, which means you remain the owner of your home. That’s why you’re required to continue paying the property charges. If the bank owned the home, they would be paying the property charges instead.
Can I lose my home with a reverse mortgage?
The HECM reverse mortgage is a home loan. Like any other home loan, it’s possible to lose your home if you don’t meet your program obligations. Your primary obligations are to live in the home, reasonably maintain it, and pay the required property charges. It’s highly unlikely you’ll lose the home if you meet these obligations.
Am I giving up ownership of my home when I get a reverse mortgage?
Absolutely not. This is one of the most common reverse mortgage FAQs I get asked. Reverse mortgage lenders are not in the business of buying or owning homes. Lenders are in the business of lending money. A HECM reverse mortgage is simply a home loan, which means you always retain title ownership of your home.
What are my responsibilities under the reverse mortgage?
Your obligation is to continue paying the required property charges, maintain the home, and live in the home. No mortgage payments are required as long as at least one borrower (or non-borrowing spouse) meets these obligations.
When does the reverse mortgage have to be paid back?
Will the reverse mortgage cause me to lose all of my equity in my home?
Not necessarily! It depends on how it’s structured and how you use it. Yes, the purpose of the HECM reverse mortgage is to give you access to your equity, but it wouldn’t be a healthy program if it used up equity quickly. The HECM is designed to preserve equity as well.
How fast you use your equity depends on how you use the reverse mortgage. If you borrow more of the proceeds, you’ll use up your equity faster. If you borrow less, you’ll preserve your equity for longer.
Regardless of how much equity you use, you’re fully protected if you ever owe more than your home is worth. The HECM is a non-recourse loan, which means FHA covers the shortage if your home isn’t worth enough to pay off the entire reverse mortgage balance.
Are interest rates on reverse mortgages really high?
Not at all. HECM rates vary from lender to lender, but they’re usually comparable to or slightly higher than 30-year fixed “forward” mortgage interest rates.
Will a reverse mortgage give me 100% of my equity?
This common reverse mortgage FAQ is rooted in misunderstandings about how a reverse mortgage works. A reverse mortgage is a home loan; the lender isn’t buying your home. You always remain the owner of your home.
A HECM reverse mortgage offers a portion of the value of your home. How much you qualify for depends on your age, home value, and the expected interest rate.
Most people qualify for an initial principal limit of roughly 40% of the home’s value. If you’re older, you may qualify for more. If you’re on the younger end of the spectrum, you may qualify for less.
The reverse mortgage is designed to give you access to more equity over time. Depending on how you use it and how long you have it, you may be able to tap into 100% of the value of your home at some point in the future.
For more detailed information about how the HECM reverse mortgage works, check out our reverse mortgage information article here.
I don’t have a mortgage on my home. Can I qualify for a reverse mortgage?
This reverse mortgage FAQ is rooted in a common misconception about the HECM reverse mortgage. You do not need to have an existing mortgage to qualify for reverse mortgage. In fact, if you have no existing mortgage balance, you’ll have more proceeds available for other purposes than if you had an existing mortgage.
I still have a mortgage on my home. Can I qualify for a reverse mortgage?
Absolutely! You can use a reverse mortgage to pay off an existing mortgage and eliminate the mortgage payment. No mortgage payments are required as long as at least one borrower (or non-borrowing spouse) lives in the home and pays the required property charges.
<h4″>Can I get a reverse mortgage on a rental property or second home?
Unfortunately, no. A HECM reverse mortgage is only available for primary residences.
Can I get a reverse mortgage on a mobile or manufactured home?
Yes, as long as it meets the FHA guidelines for manufactured housing.
Can I still get a reverse mortgage if I live in my home just part of the year?
No problem. You meet the residency requirements as long as you live in the home for the majority of the year and it’s your primary residence.
Can I leave my home to my heirs if I have a reverse mortgage?
Absolutely. You always remain the owner of your home, so you’re free to leave it to whoever you wish. The reverse mortgage balance only has to be repaid when the last borrower (or non-borrowing spouse) no longer lives in the home and pays the required property charges.
If your heirs wish to keep the home, they can pay off or refinance the balance. If they do not wish to keep the home, they can either sell it or let the lender sell it. Once the home is sold, the reverse mortgage balance is repaid, and the remaining equity goes into your estate.
What happens if my home isn’t worth enough to pay off the reverse mortgage balance?
This is one of the most important reverse mortgage FAQs. If your home isn’t worth enough to pay off the entire balance, you and your heirs are protected. The HECM reverse mortgage is a non-recourse loan. FHA will cover any shortage if the home isn’t worth enough to pay off the entire reverse mortgage balance.