Reverse Mortgage
Unlock the equity in your home without making monthly mortgage payments. Designed exclusively for homeowners aged 62 and older, a Home Equity Conversion Mortgage (HECM) provides financial flexibility in retirement.
Quick Answer
A reverse mortgage (HECM) lets homeowners aged 62 and older convert home equity into tax-free funds without monthly mortgage payments. You retain ownership of your home while accessing funds as a lump sum, monthly payments, or line of credit. FHA-insured for borrower protection.
What Is a Reverse Mortgage?
A Home Equity Conversion Mortgage (HECM) is a federally insured reverse mortgage that allows homeowners aged 62 and older to convert a portion of their home equity into funds — without selling their home or making monthly mortgage payments. Unlike a traditional mortgage where you make payments to a lender, a reverse mortgage pays you. The loan balance grows over time and is repaid when the borrower sells the home, permanently moves out, or passes away. Joshua Donion can help you determine whether a reverse mortgage is the right financial strategy for your retirement.
How a Reverse Mortgage Works
Understanding the mechanics of a HECM helps you make an informed decision about leveraging your home equity.
Borrow Against Equity
You receive funds based on your home's appraised value, your age, and current interest rates. The older you are and the more equity you have, the more you can access.
No Monthly Payments
You are not required to make monthly mortgage payments. Instead, the loan balance (principal plus accrued interest) grows over time. You remain responsible for property taxes, insurance, and maintenance.
Repayment When You Leave
The loan becomes due when you sell the home, move out permanently, or pass away. Your heirs can choose to repay the loan and keep the home, or sell the property. The loan is non-recourse, meaning you or your heirs will never owe more than the home's value.
Eligibility Requirements
Age 62 or Older
At least one borrower on the loan must be 62 years of age or older. If both spouses are on the loan, the younger borrower's age is used to calculate the available loan amount.
Primary Residence
The home must be your primary residence. Eligible property types include single-family homes, FHA-approved condominiums, manufactured homes meeting HUD standards, and multi-unit properties (up to four units) where you occupy one unit.
Sufficient Home Equity
You must have substantial equity in your home — typically 50% or more. If you have an existing mortgage, the reverse mortgage proceeds must first pay off that balance. The remaining funds are yours to use as you choose.
Benefits of a Reverse Mortgage
No Monthly Payments
Eliminate your monthly mortgage obligation and free up cash flow for living expenses, healthcare, travel, or other retirement priorities.
Stay in Your Home
Continue living in and owning your home for as long as it remains your primary residence. A reverse mortgage does not transfer ownership to the lender.
Flexible Disbursement
Receive your funds as a lump sum, monthly payments, a line of credit, or a combination — giving you control over how and when you access your equity.
Non-Recourse Loan
You and your heirs are protected by FHA insurance. If the loan balance exceeds the home's value at the time of repayment, neither you nor your estate is responsible for the difference.
Qualification Criteria
Reverse mortgage qualification is based on age, equity, property type, and your ability to maintain the home and pay ongoing obligations.
Age Requirement
The youngest borrower or eligible non-borrowing spouse must be at least 62 years old. Older borrowers generally qualify for a larger percentage of their home's value.
Home Equity
You must have significant equity in your home. Most lenders look for at least 50% equity, though the exact amount you can borrow depends on your age, current interest rates, and the home's appraised value.
Property Type
Eligible properties include single-family residences, HUD-approved condominiums, FHA-approved manufactured homes, and multi-unit properties (up to four units) where you occupy one unit as your primary residence.
Financial Assessment
Lenders conduct a financial assessment to verify that you can continue paying property taxes, homeowner's insurance, and maintenance costs. This review considers your income, assets, credit history, and existing financial obligations.
Frequently Asked Questions
Will I still own my home with a reverse mortgage?
Yes. You retain full ownership and title to your home throughout the life of the loan. The lender places a lien on the property, just like a traditional mortgage, but you remain the homeowner.
What happens to the loan when I pass away?
Your heirs have the option to repay the loan balance and keep the home, or sell the property and use the proceeds to satisfy the loan. If the home sells for less than the loan balance, FHA insurance covers the difference — your heirs are never responsible for the shortfall.
Are reverse mortgage proceeds taxable?
Generally, no. Reverse mortgage proceeds are considered loan advances, not income, and are typically not subject to federal income tax. However, consult a tax professional for advice specific to your situation.
Can I lose my home with a reverse mortgage?
The loan can become due if you fail to maintain the property, stop paying property taxes or homeowner's insurance, or cease using the home as your primary residence for more than 12 consecutive months. As long as you meet these obligations, you can remain in your home indefinitely.
Is counseling required before obtaining a reverse mortgage?
Yes. HUD requires all prospective reverse mortgage borrowers to complete an independent counseling session with a HUD-approved counselor. This ensures you fully understand the terms, costs, and alternatives before proceeding.
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