Reverse Mortgages

A reverse mortgage is a loan. That sentence is doing more work than it looks like it is, because the product is advertised so badly, so often, that a lot of people arrive believing it is a government program, or a way to get money that never has to be paid back. It is neither.

What it actually does is let a homeowner aged 62 or older convert part of their equity into cash without making a monthly mortgage payment. The balance grows instead of shrinking. It comes due later — and the "later" is the part worth understanding before anything else.

Who qualifies

For an FHA-insured HECM, which is the main reverse mortgage program:

• The youngest borrower is 62 or older at closing. Per 24 CFR 206.33, that is a hard floor, not a guideline.
• The home is your principal residence, and you keep living in it.
• You own it outright or have substantial equity. How much you can draw depends on your age, the home's value, and rates — an older borrower draws more than a younger one on the same house.
• You complete counseling with an independent HUD-approved counseling agency, and the agency issues a certificate. This is required by 24 CFR 206.41, and the certificate is good for 180 days.

That counseling requirement is not a formality anyone should try to route around, and we could not waive it if you asked. The counselor does not work for us and is not paid by us — that independence is the entire point of the rule.

What you still owe every year

No monthly mortgage payment is required. You do still have to:

• Pay property taxes, including special assessments
• Pay homeowner's insurance, and flood insurance where it applies
• Pay ground rents, condominium fees and homeowners' association dues
• Keep the home in good repair
• Live there as your principal residence

Per 24 CFR 206.205 and 206.27(c), failing on any of those can make the loan due and payable. That is the honest version of "no payments," and anyone who tells you otherwise is describing a product that does not exist.

The other triggers that make the loan due: the last surviving borrower dies, the home is sold or transferred, or all borrowers stop living there for more than twelve consecutive months.

What protects you

It is non-recourse. Neither you nor your heirs ever owe more than the home is worth when the loan is settled, even if the balance has grown past the value. That protection is statutory.

Your heirs have a defined way out. They are not inheriting the house free of the loan — nobody should tell you they are — but under 24 CFR 206.125 they can satisfy it by repaying the balance or by selling the property for at least 95% of its appraised value.

Nobody can require you to buy an annuity as a condition of the loan. Federal law prohibits it, and so does California law separately.

The 2026 numbers

For FHA case numbers assigned in 2026, the HECM maximum claim amount is $1,249,125 (HUD Mortgagee Letter 2025-22). That is the ceiling FHA will insure against — a more valuable home does not raise it.

FHA charges mortgage insurance on a HECM, both upfront and annually on the balance. We will show you the actual dollar figures for your situation rather than percentages on a web page, because what matters is what it costs on your house, not what the rate is called.

Above the FHA ceiling: proprietary reverse mortgages

For higher-value homes there are proprietary reverse mortgages — sometimes called jumbo reverse — that are not FHA-insured. That single difference drives most of the others: no FHA mortgage insurance, and no FHA maximum claim amount capping the loan.

It also means the FHA rulebook does not automatically apply. Age minimums, counseling practice, draw structures and protections are set by each lender and differ between products. We will not print a number here that we would have to caveat, because these genuinely vary — ask us and we will tell you what the specific investor's terms are for your situation.

In California, note that the state's reverse mortgage rules are written around the product, not around FHA. A proprietary reverse mortgage on a California home carries the same state counseling protections as a HECM.

Buying a home with one: HECM for Purchase

Everything above describes a reverse mortgage on a house someone already owns. There is a second version, and most people have never heard of it: you can buy a home with a reverse mortgage.

It is one transaction, not two. You are not buying with cash and then refinancing — the purchase and the reverse mortgage close together. FHA has insured these since 2008 (HUD Mortgagee Letter 2008-33).

The typical case is someone leaving a house that no longer fits. Two stories and stairs, or four bedrooms for two people, or the wrong side of the county from the grandchildren. They sell, and instead of putting the whole proceeds into the next house or taking on a mortgage payment in their seventies, they put in part of it and finance the rest with a HECM.

How the money works

FHA's principal limit factors decide how much of the purchase the reverse mortgage covers. The two things that move it are the youngest borrower's age and the expected interest rate, applied against the lesser of the sale price, the appraised value, or the FHA maximum claim amount. The older the borrower, the more the loan covers and the less they bring.

You bring the difference. That is the required investment, and it is the number that decides whether the move works. We will run it on the specific house before anyone writes an offer, because a figure that is right for a 78-year-old is wrong for a 63-year-old on the same property.

After closing there is no monthly principal and interest payment — and you still pay the property taxes, the homeowner's insurance, any HOA dues, and the upkeep, and you have to live there. Those obligations are what keep the loan from coming due, exactly as they are on any other reverse mortgage.

Where the investment can come from

HUD updated this in April 2024 (Mortgagee Letter 2024-06), and the current list is more generous than most agents realize.

Allowed: cash on hand; proceeds from selling or liquidating your own assets; the HECM proceeds themselves; contributions from interested parties, below; a real estate commission gifted by a family member entitled to it; and your own commission if you are the licensed agent on the purchase.

Not allowed: sweat equity, trade equity, rent credit, or premium pricing.

The part worth telling your agent about

Interested parties may contribute up to 6% of the sales price. That means the seller, the real estate agents, the builder or the developer — HUD excludes the lender and third-party originators, who may contribute nothing.

That 6% can go toward loan origination fees, other closing costs, prepaid items and the upfront mortgage insurance premium. HUD is specific that nothing else may be paid from it. Agent commissions and seller-paid items that state or local law requires, or that sellers customarily pay in that market, sit outside the 6% rather than inside it, as does a seller-purchased home warranty.

Discount points and interest rate buydowns are not permitted on these — temporary or permanent. HUD considered allowing them in 2023 and decided against it.

Four rules that decide whether a given house works

1. You have to move in within 60 days of closing. Not a guideline.
2. One to four units, and you live in one of them.
3. Construction has to be finished, with a certificate of occupancy or the equivalent issued. A house that is not done yet is not eligible, however close it looks.
4. Some property types are out. Co-ops are not eligible. A manufactured home has to have been built after 15 June 1976, meet HUD's construction standards, and sit on a permanent foundation.

What it does to the escrow timeline

Counseling is required before the loan, the same as on any reverse mortgage, and it is the thing most likely to be missed when a purchase is already in motion. In California nobody may accept a completed application or charge a fee until seven days after the counseling session. On a purchase that is not a formality — it is a week that has to exist inside the contract.

Plan it at the front. A reverse mortgage purchase is not a slow transaction, but it is a transaction with a fixed waiting period in the middle of it, and offers get written without one.

Two state rules worth knowing before you start

California. No lender may accept a completed application or charge you a fee until seven days after your counseling session (Civil Code §1923.2). You also receive a plain-language statement and a worksheet before counseling, and you will be given a list of at least ten approved counseling agencies to choose from.

Texas. Reverse mortgages are written into the Texas Constitution, with their own required notice, a rule that closing cannot happen until the twelfth day after you receive it, a counseling window, and foreclosure only by court order. Texas built more procedure around this product than almost any state, which generally works in the borrower's favor.

When it is the right answer, and when it is not

It can work well for someone with substantial equity, a genuine need for cash flow, and the intention and means to stay in the home long-term and keep up taxes, insurance and upkeep.

It works badly for someone who may need to move within a few years, whose budget is already too tight to cover taxes and insurance reliably, or who is being pushed toward it to buy a financial product with the proceeds.

There are usually alternatives worth pricing against it — a second mortgage or a line of credit if there is income to support a payment, a refinance if rates and credit allow, or selling. We will run the comparison honestly and tell you when a reverse mortgage is the wrong tool, which happens often enough that you should expect the conversation.

---

FAQ

How old do you have to be to get a reverse mortgage? For an FHA-insured HECM, the youngest borrower must be 62 or older at closing, per 24 CFR 206.33. Proprietary reverse mortgages set their own age requirements, which vary by lender and product.

Do I have to make monthly payments on a reverse mortgage? No monthly mortgage payment is required. You must still pay property taxes, homeowner's insurance, ground rents, condominium and association fees, keep the home in repair, and live there as your principal residence. If you do not, the loan can become due and payable and you could lose the home.

Is a reverse mortgage a government benefit? No. A HECM is a loan that is insured by the Federal Housing Administration, which is not the same thing as a government benefit or a grant. It must be repaid.

Is counseling really required? Yes. For a HECM it is required by 24 CFR 206.41, through an independent HUD-approved counseling agency that is not paid by the lender. The certificate is valid for 180 days. In California, a lender may not accept a completed application or charge a fee until seven days after counseling.

Can I owe more than my house is worth? No. A reverse mortgage is non-recourse. Neither you nor your estate owes more than the property is worth at settlement.

What happens to my heirs? They do not inherit the home free of the loan. When it becomes due, they can repay the balance and keep the property, or sell it — HUD rules let them satisfy the loan at 95% of appraised value.

What is the reverse mortgage limit for 2026? The HECM maximum claim amount is $1,249,125 for FHA case numbers assigned in 2026. Proprietary reverse mortgages are not bound by it, since they are not FHA-insured.

Can I buy a house with a reverse mortgage?

Yes. It is called HECM for Purchase, FHA has insured it since 2008, and it is one transaction rather than buying for cash and refinancing afterwards. You bring part of the purchase price and the reverse mortgage covers the rest, with no monthly principal and interest payment afterwards — and with the same obligation to pay property taxes, insurance and upkeep and to live in the home. You must occupy it within 60 days of closing.

Can the seller help with closing costs on a reverse mortgage purchase?

Up to a point. HUD allows interested parties — the seller, the real estate agents, the builder or the developer — to contribute up to 6% of the sales price toward origination fees, other closing costs, prepaid items and the upfront mortgage insurance premium, and nothing else. The lender and third-party originators may contribute nothing. Discount points and interest rate buydowns are not permitted on these loans at all.

What makes a reverse mortgage become due? The last surviving borrower dies; the home is sold or transferred; all borrowers stop occupying it as a principal residence for more than twelve consecutive months; or the borrower fails to pay property charges or maintain the property.