Reverse Mortgages: Frequently Asked Questions

We suggest that you first read Reverse Mortgage Basics.

Q:  What are reverse mortgages?
A:  A reverse mortgage is a line of credit that does not require monthly loan payments.

Q:  Does the lender take the house?
A:  This is a misconception; a reverse mortgage is merely a loan on the property that eventually will be repaid. The title remains in the name of the borrower.

Q:  When does the loan become due and payable?
A:  The loan is due and payable when the borrower sells the property, permanently leaves the home, or passes away. In the case of a couple, it is the second person to move out or pass away that triggers repayment. Until these events take place you live in the home and make no payments to the lender.

Q:  What is owed to the lender?
A:  The money paid to or on behalf of the borrower, plus accumulated interest.

Q:  If there are no payments, what are my responsibilities as a borrower with a reverse mortgage?
A:  You are required to pay your property taxes, keep current property insurance in place, maintain the home, and notify the lender if you will be away from the property for an extended period.

Q:  How can I receive the money from a reverse mortgage?
A:  While a reverse mortgage is a line of credit, the amount you qualify for can be paid to you in a variety of ways:

Lump sum up front - often used to pay off an existing mortgage
Line of credit - you choose when and what amount
Tenure - predetermined monthly amount that continues for as long as you live in the home
Term - automatic monthly amount of your choosing that ceases after a fixed period of time
A combination of the above

Q:  What happens if I run out of reverse mortgage money?
A:  In short, nothing. If you used all the available funds from the lump sum, line of credit, or term payments, the money coming from those would simply stop. No mortgage payments are required until the loan becomes due and payable (see below). If you are concerned about running out of money, then you may choose the tenure option which does not run out.

Q:  What are my options when I use up all the money from a reverse mortgage?
A:  Continue living in the home, payment-free; sell the home and take the remaining equity; or refinance with a new reverse mortgage and get additional cash out (subject to qualifying).

Q:  Do I or my heirs have to sell the property to repay the loan?
A:  No, repayment can be accomplished by refinancing with a conventional mortgage loan.

Q:  Who are reverse mortgages designed for?
A:  They are designed for homeowners at least 62 years of age (with some exceptions) who have significant equity in their homes.

Q:  What is my equity?
A:  The current value of your home, minus the total amount owed on it. For example, if your home is worth $300,000 and your mortgage balances totals $200,000, then your equity in the home equals $100,000.

Q:  Can a reverse mortgage be taken out if there is already a conventional mortgage on the home?
A:  Yes, but any existing mortgages must be paid off at closing, which is accomplished using the proceeds from the reverse mortgage.

Q:  What types of homes won't qualify for a reverse mortgage?
A:  Generally vacation homes or other secondary residences, mobile or manufactured homes that cannot be attached to a permanent foundation, rental properties of more than four units and homes on leased lands do not qualify.

Q:  What about a home in a "living trust"?
A:  A homeowner who has put the home in a living trust can usually take out a reverse mortgage, subject to review of the trust documents.

Q:  Will I have any tax liability for the reverse mortgage proceeds?
A:  Currently the Internal Revenue Service treats monies received from a reverse mortgage to be loan advances and not taxable income. For your specific situation, we recommend that you consult your tax advisor.

Q:  Can the interest charged on my loan principal be deducted for tax purposes?
A:  Generally, home mortgage interest is deductible when actually paid. If you need the tax deduction, you may choose the pay interest that has accrued on the reverse mortgage at any time. For your specific situation, we recommend that you consult your tax advisor.

Q:  How do the monies from a reverse mortgage affect Social Security, Medicare or pension benefits?
A:  The proceeds from a reverse mortgage do not affect these benefits. For your specific situation, we recommend that you consult your financial advisor.

Q:  If I take out a reverse mortgage will, my Supplemental Social Security (SSI), Medicaid, or Medi-Cal benefits be affected?
A:  A reverse mortgage will not usually affect these or most other "means tested" benefits as long as any cash advances are fully spent every month and not accumulated. Program rules change periodically so it's advisable to check with the local Area Agency on Aging. We also recommend that you consult your financial advisor.

Q:  What are the upfront costs associated with a reverse mortgage?
A:  The borrower may pay an origination fee and actual closing costs, including charges by the title and escrow companies. These costs are usually financed as part of the initial loan advance. Please fill in the form below to receive a free quote.

Q:  What if I end up owing more than my home is worth?
A:  In this unlikely event, you can rest assured that all reverse mortgages are "non-recourse" loans, which means that the borrower can never owe more than the value of the home regardless of loan balance.

Q:  What can I find more reverse mortgages information?
A:  Our Reverse Mortgage Publication page contains downloadable popular reverse mortgage publications.

Q:  How do I get my other questions answered?
A:  Request a detailed quote by filling out the form below, or click here to contact us by phone or live chat.