Can I Get a Reverse Mortgage If I Still Owe Money?
By Holly Luca | Mortgage Strategist | LendingProf | Loan Factory, Inc. | NMLS #586712. Licensed in CA, FL, IA & TX.
Yes—you may still be able to qualify.
Your current mortgage generally must be paid off when the reverse mortgage closes, using reverse-mortgage proceeds, other available funds, or a combination of both. Watch Holly’s short explanation, then review the complete written answer below.
Educational information only. Eligibility and available proceeds depend on the borrower, property, equity, program requirements, and lender approval.
Schedule a Retirement Housing ConversationWhat happens to my current mortgage?
The reverse mortgage becomes the new lien on the home. At closing, proceeds are normally used first to pay off the existing mortgage and other required liens or obligations. Remaining proceeds, if any, may be available under the payment option allowed by the program.
If available proceeds are not enough to satisfy required liens and closing costs, the homeowner may need other funds or another solution.
What determines whether I may qualify?
- For a federally insured Home Equity Conversion Mortgage (HECM), at least one borrower generally must be age 62 or older.
- The home must meet property and occupancy requirements and generally be the borrower’s principal residence.
- Sufficient equity must remain after required payoffs and costs.
- The lender completes a financial assessment, including income, credit history, property charges, and ability to meet ongoing obligations.
- HUD-approved counseling is generally required before a HECM application can proceed.
What obligations continue after closing?
A reverse mortgage does not eliminate homeownership responsibilities. Borrowers must occupy the home as their principal residence, pay property taxes and homeowners insurance on time, maintain the property, and meet other loan requirements. Failure to meet these obligations may cause the loan to become due and payable and can result in foreclosure.
The loan also generally becomes due when the last borrower sells the home, permanently moves out, or dies, subject to applicable program rules and any protections for an eligible non-borrowing spouse.
What should I compare before deciding?
Compare expected proceeds, upfront and ongoing costs, how long you expect to remain in the home, alternatives such as a HELOC or home-equity loan, effects on heirs, and your ability to meet property-charge obligations. Reverse mortgages are not appropriate for every household.
Schedule a Retirement Housing ConversationImportant reverse-mortgage information
This page discusses general HECM concepts and is not a personalized eligibility determination. A HECM is a loan secured by the home. The balance grows over time as interest, mortgage-insurance premiums, and financed charges accrue. The borrower retains title, subject to the loan and compliance with its terms. Loan proceeds may affect eligibility for certain needs-based public benefits; consult the appropriate benefits or tax professional.
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