FAQs & Resources

How Do I Qualify For A Reverse Mortgage?

Eligibility depends on the reverse mortgage program. For an FHA-insured HECM, borrowers generally must be at least 62 years old, occupy the property as their principal residence, and meet applicable financial and property requirements.

If there is an existing mortgage or other eligible lien, sufficient equity or available loan proceeds generally must be available to satisfy those obligations. Borrowers must also demonstrate the ability to meet ongoing responsibilities such as property taxes, homeowners insurance, and property maintenance.

How Much Can I Borrow?

The amount available through a reverse mortgage depends on several factors, including:

• Age of the youngest borrower
• Appraised value of the home
• Existing mortgage and other eligible liens
• Current interest rates
• Selected reverse mortgage program
• Applicable FHA or lender requirements

The amount available is not simply a percentage of the home’s market value. Existing obligations, closing costs, mortgage insurance, and the selected payment option can affect the proceeds available to the borrower.

How Can I Receive My Reverse Mortgage Proceeds?

Depending on the reverse mortgage program, borrowers may have several ways to receive available proceeds.

Options may include:

• A lump-sum distribution
• A line of credit
• Monthly payments
• A combination of available payment methods

The amount and timing of funds depend on the specific program, loan structure, and applicable requirements. Certain payment restrictions may apply.

What Costs Are Involved?

A reverse mortgage may involve a variety of upfront and ongoing costs. Depending on the program, these can include:

• Origination charges
• Mortgage insurance premiums for applicable HECM loans
• Home appraisal
• Credit or financial assessment costs
• Title and settlement charges
• Recording fees
• Counseling fees, where applicable
• Servicing charges, when applicable

The actual costs vary by transaction and program. Borrowers should review the official loan disclosures carefully to understand the estimated expenses associated with their loan.

What Is The FHA Mortgage Insurance Premium?

FHA-insured HECM loans include mortgage insurance requirements. Mortgage insurance helps support the FHA insurance program and is an important part of the HECM structure.

The applicable mortgage insurance premiums and calculations are determined by FHA guidelines and may depend on factors such as the home’s value, applicable HECM limits, and the outstanding loan balance.

Because FHA limits and premium requirements can change, borrowers should review the current figures applicable to their loan.

Do I Have To Complete Reverse Mortgage Counseling?

For an FHA-insured HECM, borrowers are generally required to complete counseling with an independent HUD-approved housing counseling agency before the loan can close.

The counseling session is intended to help borrowers understand:

• How the reverse mortgage works
• Loan costs and fees
• Borrower responsibilities
• Repayment requirements
• Alternatives to a reverse mortgage
• Potential effects on heirs and home equity

The counselor is independent of the lender and provides information to help borrowers understand the transaction before proceeding.

Are Reverse Mortgage Proceeds Taxable?

Reverse mortgage proceeds are generally considered loan proceeds rather than ordinary income and are therefore typically not treated as taxable income.

However, individual tax circumstances can differ. Homeowners should consult a qualified tax professional regarding how reverse mortgage proceeds may affect their particular tax situation or eligibility for other programs.

Do I Have To Pay Monthly Mortgage Payments?

A reverse mortgage generally does not require the borrower to make monthly principal and interest payments in the traditional way.

However, this does not mean the homeowner has no ongoing financial responsibilities. Borrowers must generally continue to:

• Pay property taxes
• Maintain homeowners insurance
• Keep the property in acceptable condition
• Meet occupancy requirements
• Follow the terms of the reverse mortgage

Failing to meet these obligations can result in consequences under the loan agreement.

Can I Pay Off A Reverse Mortgage Early?

Generally, a borrower may pay off a reverse mortgage at any time, subject to the terms of the specific loan.

Homeowners considering an early payoff should contact their loan servicer or mortgage professional to obtain the current payoff amount and understand the applicable procedures.

What Happens To My Reverse Mortgage When I Move?

A reverse mortgage generally becomes due when the last surviving borrower permanently moves from the home, subject to the terms of the loan and applicable requirements.

Temporary absences may be treated differently from a permanent move. Homeowners should communicate with their loan servicer before making a long-term change in occupancy.

What Happens To The Reverse Mortgage When The Borrower Dies?

When the last surviving borrower passes away, the reverse mortgage generally becomes due.

Eligible heirs may have options regarding the property, depending on the loan terms, property value, outstanding balance, and applicable program requirements. Heirs should contact the loan servicer promptly to understand the available options and deadlines.

Can My Heirs Inherit My Home?

A reverse mortgage does not automatically transfer the home to the lender when the borrower dies. Eligible heirs may have the opportunity to keep or sell the property, subject to the reverse mortgage balance and applicable requirements.

Does A Reverse Mortgage Affect My Home Ownership?

A reverse mortgage is a loan secured by the property. The homeowner generally retains ownership of the home while satisfying the requirements of the loan.

The borrower remains responsible for meeting the obligations stated in the loan documents, including applicable property taxes, insurance, maintenance, and occupancy requirements.

Can I Use The Money For Any Purpose?

Reverse mortgage proceeds can generally be used for a variety of personal financial purposes, subject to applicable program requirements.

Some homeowners may use the funds to:

• Pay off an existing mortgage
• Cover home improvement expenses
• Manage retirement expenses
• Address healthcare or personal costs
• Establish a line of credit
• Improve overall cash-flow flexibility

Homeowners should consider their long-term financial situation before deciding how to use their home equity.

Where Can I Learn More?

Reverse mortgage regulations and program requirements can change. Homeowners should use reliable government and consumer resources when researching their options.

Helpful resources include:

U.S. Department of Housing and Urban Development (HUD)
Information about FHA-insured HECM loans, housing counseling, and approved counseling agencies.

Consumer Financial Protection Bureau (CFPB)
Educational information about reverse mortgages, consumer protections, and questions to consider before applying.

Federal Trade Commission (FTC)
Consumer information about avoiding mortgage-related scams and reporting potential fraud.

Have More Questions About Reverse Mortgages?

Every homeowner’s circumstances are different. Understanding the eligibility requirements, available proceeds, costs, responsibilities, and repayment conditions can help you evaluate your options.

Michael S. Wayland, Jr., Senior Loan Officer with C2 Financial Corporation, can provide information about available reverse mortgage programs and help you understand the general requirements that may apply to your situation.

Michael S. Wayland, Jr.
Senior Loan Officer
C2 Financial Corporation
NMLS #1835735 | Company NMLS #135622
12230 El Camino Real, Suite 100, San Diego, CA 92130
Phone: (614) 906-4355
Email: mwayland@c2financial.com