What is a reverse mortgage, and how does it work?

A reverse mortgage is a loan for homeowners aged 55 and older that allows you to convert a portion of your home equity into cash. Unlike traditional mortgages, you don’t make monthly payments. Instead, the loan balance is repaid when you sell the home, move out, or pass away.

You can receive funds as a lump sum, fixed monthly payments, a line of credit, or a combination. The loan is secured by your home, which remains your property as long as you meet the loan terms.

Am I eligible for a reverse mortgage?

To qualify, you must:

• Be at least 62 years old.
• Own your home outright or have significant equity (typically at least 50%).
• Use the home as your primary residence.
• Participate in a counseling session with a HUD-approved counselor.
• Demonstrate the ability to maintain property taxes, homeowners insurance, and any applicable HOA fees.
• Meet FHA property standards and flood zone requirements.

What are the different types of reverse mortgages?

• Home Equity Conversion Mortgage (HECM): The most common and FHA-insured option for homeowners 62 and older. Offered by South River Mortgage, HECMs includes flexible disbursement options like lump sums, lines of credit, and fixed monthly payments.
• Proprietary Reverse Mortgages: Offered by private lenders like South River Mortgage, these loans are suitable for younger homeowners (under 62) or those with high-value homes (over $1 million) who want to access a larger portion of their equity.
• Single-Purpose Reverse Mortgages: Typically offered by state or local government programs for specific needs like home repairs or property taxes. These are not readily available.

How much money can I get with a reverse mortgage?

The amount you qualify for depends on:

• Your age (or the youngest borrower’s age if you’re married).
• The appraised value of your home (up to the FHA lending limit of $1,209,750 for HECMs).
• Current interest rates.
• Remaining mortgage balance (if applicable).

Use our Reverse Mortgage Calculator above to estimate how much you may qualify for—no personal information required.

What are the costs associated with a reverse mortgage?

Typical costs include:

• Origination fees: Charged by the lender to process the loan.
• Mortgage insurance premiums (MIP): Required for HECM loans to protect borrowers and lenders.
• Closing costs: Appraisal fees, title insurance, and other associated costs.
• Servicing fees: Some older reverse mortgages included ongoing servicing fees, but these are less common today.

These costs are usually financed into the loan balance, meaning you won’t pay out of pocket.

What happens if I outlive the reverse mortgage?

It is not possible to outlive a reverse mortgage. You can stay in your home for as long as you live, provided you meet the loan terms (e.g., keeping up with taxes and insurance). A reverse mortgage doesn’t have a set repayment term.

Will I lose my home if I take out a reverse mortgage?

No, you’ll retain ownership of your home as long as you comply with the loan terms, such as paying property taxes, homeowners insurance, and maintaining the property.

Can my heirs inherit the home?

Yes. When the loan becomes due, your heirs can repay the loan balance (usually by selling the home) and keep any remaining equity. Since HECMs are non-recourse loans, heirs will never owe more than the home’s value.

When does a reverse mortgage make sense?

A reverse mortgage may be a good fit if you:

• Need supplemental income for retirement.
• Want to consolidate debt or avoid taxable withdrawals from retirement accounts.
• Plan to age in place and maintain your current lifestyle.
• Require funds for home improvements, medical expenses, or long-term care planning.

What alternatives are there to a reverse mortgage?

If a reverse mortgage isn’t right for you, consider these options:

• Cash-Out Refinance: Replaces your existing mortgage with a new, larger loan, giving you the difference in cash.
• Home Equity Line of Credit (HELOC): Offers a revolving line of credit secured by your home equity, with flexible borrowing and repayment terms.
• Home Equity Loan: Provides a lump sum of cash secured by your home equity, repaid in fixed monthly installments.

What questions should I consider before applying?

• Do I need to access my home equity now, or can I wait?
• How long do I plan to stay in my home?
• Will my spouse want to remain in the home if I pass away or move out?
• Do I have other income sources to cover taxes, insurance, and maintenance?

What are the repayment terms for a reverse mortgage?

The loan becomes due when:

• The borrower sells the home.
• The borrower no longer occupies the home as their primary residence (e.g., moves to assisted living).
• The last surviving borrower passes away.

Repayment is typically handled by selling the home, but other options may be available.

Are reverse mortgage proceeds taxable?

No, reverse mortgage proceeds are considered loan advances and are not taxable income. However, consult a tax advisor for personalized advice.

How can South River Mortgage help me decide?

At South River Mortgage, we take the time to understand your unique financial goals and help you determine if a reverse mortgage aligns with your needs. We’re committed to transparency, ensuring you have all the information you need to make an informed decision.