Specialty Lending
A reverse mortgage is a home loan designed specifically for homeowners age 62 and older that converts a portion of home equity into tax-free cash — either as a lump sum, a line of credit, monthly payments, or a combination — without requiring monthly principal and interest payments. The most common type, the Home Equity Conversion Mortgage (HECM), is federally insured by the FHA. Instead of making payments to a lender, the loan balance grows as interest accrues; repayment comes due only when the last remaining borrower moves out permanently, sells the home, or passes away. The estate or heirs can then repay the loan and keep the home, or the home is sold to repay the loan and any remaining equity goes to the estate. Reverse mortgages are heavily regulated — counseling is mandatory, loan amounts are capped based on age and home value, and the borrower retains full ownership of the home throughout. They’re a powerful retirement tool when used thoughtfully, but they’re not the right fit for every situation, which is why the counseling requirement exists.
Rather than making payments to a lender, the lender makes payments to you — or provides a lump sum or line of credit — based on your home’s equity, age, and current interest rates.
You remain the homeowner throughout the life of the loan and must continue to pay property taxes, homeowners insurance, HOA dues, and maintain the home in good condition.
The loan becomes due when the home is no longer your primary residence, you sell it, or the last remaining borrower passes away.
The most common program is the FHA-insured Home Equity Conversion Mortgage (HECM), with loan limits set by HUD ($1,149,825 in 2024).
Non-FHA jumbo reverse mortgages (also called proprietary reverse mortgages) finance homes valued above the HECM limit, typically up to $4M in home value.
HUD-approved counseling is required before closing — it’s a consumer protection designed to ensure you fully understand the product before committing.
Homeowner age 70 with a $150k remaining mortgage balance on a $600k home. A reverse mortgage can pay off the existing mortgage and eliminate the monthly payment — freeing up retirement cash flow.
Homeowner age 72 with limited Social Security and pension income but $400k+ in home equity. Reverse mortgage tenure payments provide predictable monthly income for life, independent of investment returns.
Financially comfortable homeowner age 67 wants an emergency fund without liquidating investments. A HECM line of credit grows over time (unused line credit compounds) and can be drawn when needed.
Homeowner age 74 sells the current home for $700k and uses the HECM for Purchase program to buy a $550k downsized home. Puts roughly 50–60% down (from sale proceeds) and finances the balance — with no monthly payment required.
Homeowner age 78 wants to stay in the family home but has limited liquid cash for home modifications (ramps, grab bars, first-floor bedroom conversion). Reverse mortgage funds the modifications without monthly payments.
Principal Limit Factor (PLF) at age 70 is roughly 50–55% of home value, depending on current interest rates. Approved HECM amount roughly $260k. Borrower can take this as a lump sum, monthly tenure payments (about $1,700/month for life), or a line of credit.
PLF at age 65 is roughly 45% of home value → approved amount $200k. The $100k existing mortgage is paid off at close; borrower receives the remaining $100k as lump sum, line of credit, or monthly payments. No monthly mortgage payment from this point on.
Selling current home for $650k; buying a $450k retirement home. PLF at age 75 is roughly 57% → about $256k in HECM proceeds. Borrower brings $194k (42% of purchase) from sale proceeds; HECM funds the rest. No ongoing monthly payment on the new home.
Example figures use illustrative rates and are for educational purposes only. Actual rates, terms, and costs depend on credit profile, market conditions, and property specifics.
HELOC requires ongoing monthly payments and has a variable rate; reverse mortgage has no monthly payment. HELOC is cheaper if you can afford the payments and need short-term access; reverse mortgage is better for long-term retirement income or payment elimination.
Cash-out refinance replaces your existing mortgage with a larger one and requires ongoing payments. Reverse mortgage eliminates payments entirely. Cash-out works if you have strong retirement income; reverse works when you need payment relief.
Home equity loans are fixed-rate second mortgages with fixed monthly payments. Reverse mortgages have no monthly payment but accumulate interest. Senior homeowners who plan to age in place and want to eliminate payments generally choose reverse.
Selling fully liquidates your equity and eliminates property maintenance, but costs you your home. Reverse mortgage keeps the home and gives you partial liquidity. HECM for Purchase lets you downsize AND use reverse mortgage financing on the new home.
Explore the programs reverse mortgages for homeowners 62+ are most often compared against, plus the Specialty Lending hub for the full lineup and today's mortgage rates for current pricing context.
No. That’s one of the defining features of a reverse mortgage — there are no required monthly principal and interest payments. You do still need to pay property taxes, insurance, and keep the home in good condition.
Yes. You retain ownership of your home throughout the life of the loan. The reverse mortgage is simply a lien against the property, just like a traditional mortgage.
Yes — it’s a required step. Before closing on a reverse mortgage, you must complete a session with a HUD-approved counselor. It’s designed to make sure you fully understand how the loan works and whether it’s the right fit.
Your heirs have several options: (1) repay the reverse mortgage balance and keep the home (refinancing to a traditional mortgage if needed), (2) sell the home and use proceeds to repay the loan — any remaining equity goes to the estate, or (3) sign a deed-in-lieu if the home is worth less than the loan balance (reverse mortgages are non-recourse, so the estate isn’t liable for any shortfall).
Depends on your age (older = higher percentage), home value (capped at $1,149,825 for HECM), and current interest rates. Typical principal limits range from 40% at age 62 to 65% at age 85. A 70-year-old with a $500k home might borrow up to $250–275k depending on rates.
No. Reverse mortgage funds are considered loan proceeds, not income, so they’re not subject to federal income tax. They also don’t affect Social Security or Medicare eligibility. They may affect need-based benefits (Medicaid, SSI) — consult a benefits counselor if you receive those.
Initial mortgage insurance premium (2% of the home’s value on HECMs), origination fee (up to $6,000 on HECMs), plus third-party costs (appraisal, title, counseling). Upfront costs can total 3–5% of home value; many borrowers finance these into the loan.
Yes. A HECM-to-HECM refinance can make sense when home values rise materially, allowing you to access more equity. It can also be used to add a spouse to the loan or switch distribution structure. Consider the new upfront costs vs. the incremental benefit.
Yes — this is the HECM for Purchase program. You bring a large down payment (typically 40–55% depending on your age) and the reverse mortgage finances the balance. No monthly payment required after close. Great for downsizing in retirement.
If all borrowers listed on the loan move out of the home permanently (defined as more than 12 consecutive months), the loan becomes due and payable. This is a major consideration for couples where one spouse needs care while the other continues living in the home.