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Reverse Mortgage FAQ

Note: The FAQs provided here are guidelines only.  There are exceptions to every rule, and your specific situation may be different from the ones assumed in our FAQs.  MortgageEase.com is not a legal or tax advisor.  Please consult your attorney or tax professional for specific answers to your reverse mortgage questions.

What type of person qualifies for a reverse mortgage?

Reverse mortgages are designed for senior citizens.  At MortgageEase, our specific qualifications are:

  • You must be a homeowner 62 years of age or older.
  • Any person listed on your home's deed must also be at least 62 years old.
  • The property you want the mortgage for must be your primary residence.
  • Any liens must be paid off at settlement.  The monies received from the mortgage can be used to immediately pay off any existing mortgages.
  • You must be willing to be counseled about the reverse mortgage process.  This free counseling is HUD-mandated.

How can I spend the loan proceeds?

The more appropriate question is what CAN'T you do with the proceeds of a reverse mortgage?  Pay off your existing mortgage or credit card debts, put money toward rising healthcare costs, buy a new car, take a dream vacation or spoil your grandkids rotten…it's up to you!

What are reverse mortgage benefits?

  • No income necessary: There are no particular income or credit requirements to qualify.
  • No taxes due: Money you receive isn't considered income, and isn't taxed as income.
  • No payment necessary:  Until you no longer reside at the property, no repayment is required.  You can live in your home until you move, sell your home or pass away without paying back one penny of the loan.
  • No worries: All reverse mortgages are fully insured under the Federal Housing Administration’s mortgage insurance program.

What about taxes?  Will I be taxed on the money I receive?

No.  Because a reverse mortgage is technically a loan, it isn't considered income, nor is it subject to income tax.

How does a reverse mortgage pay out money?

These types of loans are highly flexible and customizable.  If one of the plans below doesn't fit your needs perfectly, contact us we'll put together a mortgage plan just for you!

  • LUMP SUM CASH: This means you receive the entire value of your reverse mortgage in one check.
  • LINE OF CREDIT: Like a HELOC, a line of credit lets you get cash as needed.  There is no specific time or amount you must withdraw. Money left in your line of credit increases in value each year and doesn't accrue interest.
  • TERM: Select an fixed period of time (5 years, 10 years) and get the same payment each month for the duration.
  • MODIFIED TERM: A hybrid of a term option and a line of credit, the modified term lets you designate some of your proceeds as a line of credit and the rest of your proceeds as a series of fixed monthly payments for a specific amount of time.
  • TENURE: Get a set payment each month for as long as you live in your house.
  • MODIFIED TENURE: A hybrid of a tenure option and a line of credit, the modified tenure lets you designate some of your proceeds as a line of credit, and the rest of your proceeds as a series of fixed monthly payments for as long as you live in your home.

Can I change my reverse mortgage payment plan?

Certainly!  At MortgageEase, we understand that your needs change throughout your life…and even throughout your retirement.  That's why you can change plans and payment options any time you want, as many times as you want.  And with any of our options, the money is yours to spend in any way you wish.  

Would I ever have to sell or leave the home?  What if the amount I owed was more than the home was worth?

You will never be forced to sell your home as long as you:

1. Live there: You occupy the home as your primary residence.

2. Insure it: Maintain your homeowner's insurance policy.

3. Pay your taxes: Pay any real estate property taxes and/or other assessments (like a city-mandated sewer upgrade fee or a homeowner's association 'common area improvement' fee.)

For a little more peace of mind, consider this: When a reverse mortgage loan does become due, the loan is tied only to the property itself.  The lender can NOT consider any of your other assets (other homes, personal property like cars, or property belonging to your business) or your family's assets as potential sources of repayment.  Additionally, if your property value is less than the reverse mortgage payoff, neither you nor your heirs owe any additional monies—FHA mortgage insurance covers any amount still due.

What's the difference between a reverse mortgage and home equity loan?

There are a several differences between reverse mortgages and home equity loans, as outlined in the chart below.

Reverse mortgage

Home equity loan

Monthly payments

No monthly payments due

Regularly monthly payments due

Repayment

Repaid only after you no longer live in the house

Repaid every month, regardless of where you live

Qualifying

Based on your age, no income or credit requirements

Based on your income and credit history

Requalifying

Never have to requalify

May have to requalify yearly

Will my children owe anything to the lender when I die?

No.  When you pass away or are no longer living on the property for whatever reason, the loan becomes due.  Your children/estate can repay the loan by selling your home or refinancing your existing mortgage.  If the amount of your loan is higher than the value of your home, it doesn't matter—your heirs are NOT responsible for paying anything above the value of the property.

Do reverse mortgages affect SSI, Social Security, Medicare or Medicaid benefits?

Typically, no…as long as you draw only the money that you need to spend that month.  Homeowners who receive these benefits must be careful not to have an excess of cash on hand, as this is considered a liquid asset and may affect your eligibility for certain need-based programs.   

If you receive SSI, Social Security, Medicare, Medicaid or other benefits, your best bet is to speak to your attorney or financial advisor.  Additionally, your local senior center or Department of Aging may have benefits specialists who can help you determine what, if any impact this type of mortgage may have on your situation.

I still have a 'regular' mortgage on my house.  Can I take out a reverse mortgage?

Yes, but you'll have to pay off your 'regular' mortgage at closing.  You can use monies from your reverse mortgage to pay off your existing mortgage.

Are there homes that don't qualify for a reverse mortgage?

Typically, the following types of homes do not qualify:

  • Second homes, like vacation homes
  • Mobile or manufactured homes that are not attached to a permanent foundation
  • Homes on land that is leased, not owned
  • Rental properties with more than four units

Can I take out a reverse mortgage on a home in a "living trust"?

Typically, after a review of the trust documents.

Are there any upfront costs associated with a reverse mortgage?

Yes, but keep in mind that the origination fee and closing costs can be included in the initial loan advance.

Does the lender ever take the house?  Does the title/deed belong to the lender?

No, the lender does not 'take' the house.  The title and deed remain in the name of the homeowner.

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