Reverse mortgage
A reverse mortgage turns part of an older homeowner's equity into cash without monthly principal and interest payments. The balance grows over time, and the loan is repaid when the home is sold or the last borrower leaves.
Older homeowners with substantial equity who want to draw on it and stay in their home.
What a lender will ask for
- A borrower who meets the program's minimum age. Most reverse mortgages are Home Equity Conversion Mortgages, insured by the Federal Housing Administration, which sets that age. Some private reverse mortgages set their own.
- For a Home Equity Conversion Mortgage, a session with an independent counsellor approved by the Department of Housing and Urban Development before you apply. It is required, and it is there to protect you.
- The home as your primary residence, with substantial equity in it.
- A financial assessment showing you can keep paying property tax, homeowners insurance and any association dues.
- A property that meets the program's standards, established by an appraisal.
What it offers
- Cash from your equity as a lump sum, a line of credit, regular monthly amounts, or a combination, depending on the loan.
- No monthly principal and interest payment while you live in the home and keep to the loan's terms.
- The home stays in your name.
- A Home Equity Conversion Mortgage is non-recourse: when the home is sold to repay it, the amount owed is generally limited to what the home is worth.
What to weigh up
- The balance grows every month as interest and mortgage insurance are added, so the equity left for you or your heirs shrinks.
- Property tax, homeowners insurance and upkeep remain yours to pay. Falling behind on them can make the loan due, and can lead to losing the home.
- The loan becomes due when the last borrower sells, moves out for good, or dies. A spouse who is not a borrower on the loan should understand exactly where that leaves them.
- Upfront costs are usually higher than on an ordinary mortgage, including mortgage insurance on a Home Equity Conversion Mortgage.
- Texas sets its own rules for reverse mortgages on a homestead, and we explain how they apply before you commit.
- Fedrate Mortgage is not affiliated with, nor acting on behalf of, the Federal Housing Administration, the Department of Housing and Urban Development, or any other government agency.
Related loan programs
Start with a pre‑qualification request
Tell us what you want to do and where, and we come back with options compared across multiple wholesale lenders. A pre-qualification request starts it, and nothing is a commitment until a lender has reviewed your file.