FAQs & Resources

The short answer is, it depends. There are several variables that determine just how much of the home value you’ll be able to access. For instance, the borrowing limit (known as the “principal limit”) can depend on factors such as your age, home value as determined by an appraisal, the amount of outstanding loans against your house, and current interest rate.

The homeowner always maintains the title and ownership of their home, just like a traditional mortgage. You’ll have to meet your loan obligations by keeping current with property taxes, homeowner’s insurance, and home maintenance, as you do now

Because a reverse mortgage does not require monthly mortgage payments, the loan repayment process doesn’t have to begin until you’re no longer living in the home, or if you do not meet the terms of the loan – which includes keeping current with property taxes, insurance, and home maintenance.

Yes. If there’s an existing mortgage on your home, the proceeds from the reverse mortgage are first used to pay off that loan—and since no monthly mortgage payments are required, you can eliminate that monthly mortgage expense and keep more cash to use as you see fit. You’ll have to continue to keep current with property taxes, insurance, and maintenance.

With a reverse mortgage, your heirs can inherit the house, just as they would with any other mortgage. When the loan becomes due, they can decide how to repay the loan balance. Most often, the home is sold and proceeds are used to repay the lender. If there’s any money left over, it goes to your estate. And unlike a traditional mortgage, a reverse mortgage has non-recourse protection—which means that you or your heirs will never owe more than the home’s value when it is sold. 

Reverse mortgage proceeds can be taken as a one-time, tax-free payment*, steady, tax-free monthly payments*, a line of credit** as a “safety net” for future use, or any combination of these methods.

*Consult a financial advisor and appropriate government agencies for any effect on taxes or government benefits.

**Line of credit option is only available for adjustable rate HECM products.

No, reverse mortgage funds are considered non-taxable. What’s more, you can avoid making taxable withdrawals from 401(k) or other retirement plans by replacing the money with a tax-free reverse mortgage.* To learn more, watch our video on the tax implications of a reverse mortgage.

Yes. While reverse mortgages do not require monthly mortgage payments, you may choose to make periodic payments as often as you’d like. You must keep current with property taxes, insurance, and maintenance. But unlike some other types of loans, with a reverse mortgage there are no prepayment penalties.

Once you’ve decided that a reverse mortgage is right for you, all borrowers are required to meet with a FHA-approved counselor, either by phone or in person. This is an important step that certifies that you fully understand how a reverse mortgage works before you complete your reverse mortgage application. Plus, it’s a great opportunity to make sure that all your questions have been answered by a third party and that you’re clear on all the details: the process, the financial implications, your options, and more.

The short answer is, you can use the proceeds from a reverse mortgage in any way you wish.