FAQs & Resources
*These FAQs are not from HUD or FHA and have not been approved by HUD, FHA or any federal government.
How Do I Qualify For A Reverse Mortgage?
You must be at least 62 years old and own your home to be eligible for a reverse mortgage. You must have enough equity in your home to pay off any outstanding debt, and your home must be your primary residence. As part of the qualification procedure, all applicants are subjected to a financial examination to determine their financial capacity and desire to pay responsibilities.
How Much Money Could I Get?
Your age at the time of closing, the value of your home, the total number of liens, and interest rates all affect the amount of money a lender will loan you. The amount of money you will get depends on the amount of your existing mortgage and necessary responsibilities, as well as the payment method you choose. Borrowers are only permitted to use 60% of the available funds (after closing expenses and fees) in the first year. The remaining money will be available in year two. HUD's maximum payout restriction allows for the greater of:
60% of the Principal Limit (the amount of money accessible to the borrower throughout the loan's term) in the first twelve months from the closing date OR
Mandatory Obligations (existing mortgage payback, tax liens, closing charges, and mortgage insurance premium) + 10% of the Principal Limit. At the time of loan closing, this sum cannot exceed the total Principal Limit.
How Do I Receive My Money?
There are various alternatives to consider. You can withdraw the funds in a lump sum (up to HUD's first-year maximum withdrawal)*, establish a line of credit, make monthly payments, or a combination of the three. The Line of Credit or monthly Tenure Payments or monthly payments cannot exceed 60% of the Principal Limit in the first year. When appropriate, the available Line of Credit or Tenure/Monthly payments will be increased after the first year.
* Fixed interest rate reverse mortgages only allow for the Single Disbursement Lump Sum payment plan.
What Costs Are Associated With A Reverse Mortgage?
The fees and costs of a reverse mortgage are determined by a number of factors. An origination fee is given to the broker/lender, a MIP (mortgage insurance premium) is paid to FHA on the Home Equity Conversion Mortgage (HECM), an appraisal fee, a flood certification cost, a document preparation fee, title, settlement, and escrow fees are all paid to the broker/lender. The Good Faith Estimate (GFE) clearly shows all costs. Monthly service costs may apply.
What Are The FHA Mortgage Insurance Premium Charges?
The FHA requires a Mortgage Insurance Premium (MIP) to be collected at closing and during the loan's term. These premiums are added to the loan balance of the borrower. The upfront Mortgage Insurance Premium (MIP) is determined at closing using your home's appraised value up to a maximum of $1,089,300 (the 2023 nationwide HECM limit limitation). The monthly FHA insurance premiums are computed based on the outstanding loan balance.
Is it necessary for me to go through counseling before applying for a reverse mortgage?
Yes. To safeguard consumers from receiving erroneous information concerning reverse mortgages, counseling with an independent third-party, HUD-approved counselor is essential. Before the loan can be closed, the lender must receive the counseling certificate. Contact your Mortgage Loan Originator or your local HUD office to find a reverse mortgage counselor near you.
Is the money I receive from my reverse mortgage taxed?
While the proceeds from a reverse mortgage are generally not subject to individual income taxation, you should contact with your tax expert.
Is it necessary for me to pay any fees to the reverse mortgage lender during the term of my loan?
A reverse mortgage was established so that borrowers would not have to pay most costs during the loan's term. The appraisal and HUD-approved reverse mortgage counseling are typical upfront expenditures (some providers waive counseling fees at their discretion). However, reverse mortgages may be subject to a monthly maintenance cost (which will be financed and added to the loan total). Please consult with your Mortgage Loan Originator for further details on the service set-aside.
Resources
AARP free information on reverse mortgages
Phone: 1-800-569-4287The Eldercare Locator: Local Resources for Older Adults
Phone: 1-800-677-1116Federal Trade Commission (FTC) to report possible fraud
Phone: 1-877-FTC-HELP (1-877-382-4357)National Council For Aging Care
Phone: 1-877-664-6140
This material is not provided by, nor was it approved by the Department of Housing & Urban Development (HUD) or by the Federal Housing Administration (FHA). It is not intended to be a substitute for legal, tax, or financial advice. Consult with a qualified attorney, accountant, or financial advisor for additional legal or tax advice.
*There are some circumstances that will cause the loan to mature and the balance to become due and payable. The borrower(s) must continue to pay for property taxes and insurance and maintain the property to meet HUD standards or risk default. Credit is subject to age, minimum income guidelines, credit history, and property qualifications. Program rates, fees, terms, and conditions are not available in all states and subject to change.
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