Frequently Asked Questions

Homes that are eligible for a reverse mortgage loan include single-family homes, detached homes, townhouses, modular homes, and two-to-four unit properties where the owner occupies one of the units. Condominiums must be FHA-approved for the FHA HECM loan, and some manufactured homes are also eligible. Contact me for more details on manufactured home eligibility. 

If you outlive the loan, you will not have to repay the lender if you have an FHA HECM loan. As long as one of the borrowers on the loan note (or original non-borrowing spouse) lives in the home, continues to pay the taxes and insurance and maintains the home in good condition and complies with the loan terms, you will not need to repay the loan while you're alive and living in the home as your primary residence. Once the last surviving borrower passes away (or the non-borrowing spouse), the home is either sold or the obligations of the loan are met by heirs who wish to keep the home, through a cash transaction of by securing a loan of their own that repays the balance owing on the reverse mortgage. 

In a HECM, once the last surviving borrower either passes away, sells the home, or no longer resides there as their primary residence, then the borrower or their estate is responsible for the repayment of the money they received from the reverse mortgage loan, plus interest and other fees. Any remaining equity belongs to either the borrower or their heirs. A “non-recourse” clause prevents either the borrower or their estate from being responsible for more than the value of the home at the time the loan is repaid. If the ending loan balance exceeds the home's value, the estate (heirs) can sign a deed in lieu of foreclosure releasing the property or pay 95% of the home's appraised value, less customary closing costs & real estate commissions. 

HUD advises against using any service that charges a fee (except required HECM counseling) or any service that requests a lender referral fee to obtain a reverse mortgage loan. HUD provides this information free of charge and can direct you to HUD-approved housing agencies that offer approved reverse mortgage loan counseling or additional services that are free or have a minimal cost. There is typically a reverse mortgage loan (HECM) counseling fee that ranges from $125 - $160. If the borrower cannot afford this fee, some counseling agencies will waive the fee for qualified applicants. You can find a HUD-approved housing counseling agency near you by calling 1-800-569-4287 toll free.  

Adjustable interest rate reverse mortgage loan payments can be received in one of five ways: 

     • Tenure: equal monthly payments 

     • Term: equal monthly payments for a fixed period of months as decided by the borrower   

     • Line of Credit: payments made in installments or at various times and in amounts

       dictated by the borrower(s) 

     • Modified Tenure: monthly payments with a line of credit 

     • Modified Term: monthly payments for a fixed period of months with a line of credit*

* HECM fixed interest rate mortgages are limited to the Single Disbursement Lump Sum payment option, which is one full draw at loan closing and no future draws are available. Adjustable interest rate mortgage programs provide for five flexible payment options and allow for future draws.  Initial distribution caps will apply. 

What Are the Differences Between a Home Equity Line of Credit and a Reverse Mortgage Loan? 

Reverse mortgage loans are unique because they allow the borrower to receive loan proceeds that do not require immediate repayment as long as: 

• the borrower remains in the home as their primary residence.
• does not sell the home.
• has at least one borrower living in the home.
• meets the basic income and credit standards.
• follows loan guidelines. 

Obtaining home equity loan programs other than a reverse mortgage (like a home equity line of credit, HELOC, or second mortgage) require that you have sufficient income to cover the debt. Plus, you must continue to make monthly principal and interest mortgage payments. With a reverse mortgage loan, you must meet basic income and credit guidelines, but you are not required to make monthly principal and interest payments. Keep in mind you must continue to pay all property related fees, taxes and homeowner’s insurance and maintain the property in good condition. 

*Buyers must meet all loan obligations, living in the home as their primary residence and paying all property charges, including property taxes, hazard insurance, and keeping up with maintenance on the home. If borrowers fail to meet these requirements, then the loan must be re-paid. This not tax advice. Consult a tax professional. This information is not directly from HUD or any government agency. NMLS #964665 - Alex John Palermo.