To become eligible for a reverse mortgage, you must be at least 62 years old and own your home. You must have equity in the house to pay off any outstanding balances, and your home must be occupied as your principal residence. All applicants are subject to a financial assessment to determine their financial capacity and willingness to pay obligations as part of the qualification process.

The amount of money that a lender will loan depends on how old you are at the time of closing, how much your house is worth, the total amount of liens, and interest rates. The payoff of your existing mortgage and mandatory obligations along with the payment option chosen will affect the amount of money you will receive. HUD limits borrowers to using 60% of the available money (after closing costs & fees) in the first year. The remaining funds are accessible beginning year two.

There are several different options to choose from. You can take the money in a lump sum (up to HUD’s first-year maximum withdrawal)*, set up a line of credit, monthly payment, or a combination of all three. In the first year, the Line of Credit or monthly Tenure Payments or monthly payments cannot exceed 60% of the Principal Limit. After the first year, the available Line of Credit or Tenure/Monthly payments will be increased when applicable.

* Fixed interest rate reverse mortgages only allow for the Single Disbursement Lump Sum payment plan.

The fees and cost of a reverse mortgage are based on a number of items. For example, an origination fee is paid 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 fee, a document preparation fee, title, settlement, and escrow fees. All costs are clearly shown on the Good Faith Estimate (GFE). Monthly servicing fees could apply.

FHA requires a Mortgage Insurance Premium (MIP) to be collected at closing and during the life of the loan. These premiums are charged to the borrower's loan balance. The upfront Mortgage Insurance Premium (MIP) is calculated using your home's appraised value or a maximum of $1,209,750 (the 2022 national HECM limit cap) and is charged at closing. The ongoing FHA insurance premiums are calculated using each month's outstanding loan balance.