Instead, borrowers can only borrow a portion of their property’s value. However, when using a government-backed reverse mortgage program, homeowners are prohibited from borrowing up to their home’s appraised value or the FHA maximum claim amount ($765,600). All limits and restrictions are set by individual lenders. If you get a proprietary reverse mortgage, there are no set limits on how much you can borrow. Private reverse mortgages have their own qualification requirements that vary by lender and loan program. They also have to stay current on property taxes and homeowner’s insurance and keep their property in good condition. In the case of government-sponsored reverse mortgages, borrowers also are required to sit through an information session with an approved reverse mortgage counselor. Manufactured homes built after June 1976.Multi-unit properties with up to four units.Typically only certain types of properties qualify for government-backed reverse mortgages. If the borrower doesn’t own their house outright, they usually have to pay off their existing mortgage with the funds received from a reverse mortgage. Borrowers can only borrow against their primary residence and must also either own their property outright or have at least 50% equity with, at most, one primary lien-in other words, borrowers can’t have a second lien from something like a HELOC or a second mortgage. In order to qualify for a government-sponsored reverse mortgage, the youngest owner of a home being mortgaged must be at least 62 years old. The borrower gets any money that remains after the loan is repaid.

These loans last until the borrower dies or moves, at which time they (or their heirs) can repay the loan, or the property can be sold to repay the lender. Some loans have restrictions on how the funds can be used (such as for improvements or renovations), while others are unrestricted. If approved, the lender funds the loan, with proceeds structured as either a lump sum, a line of credit or periodic annuity payments (monthly, quarterly or annually, for example), depending on what the borrower chooses.Īfter a lender funds a reverse mortgage, borrowers use the money as provided for in their loan agreement. The lender does a credit check, reviews the borrower’s property, its title and appraised value. Once the borrower picks a specific loan program, they apply for the loan. The borrower decides they need the liquidity that comes with removing equity from their home, so they work with a reverse mortgage counselor to find a lender and a program. The borrower either has considerable equity in their home (usually at least 50% of the property’s value) or has paid it off completely. The process of using a reverse mortgage is fairly simple: It starts with a borrower who already owns a house.

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