Could Your Home Equity Give You More Financial Flexibility?
I'm Corey Moser, a Utah mortgage broker with nearly 30 years of experience. My goal is to help you understand how reverse mortgages work, what they cost, and whether one might make sense for your retirement plans. No pressure. Just clear information to help you make an informed decision.
HECM Reverse Mortgages at a Glance
- Generally available to eligible homeowners age 62 and older
- You retain ownership of your home
- No required monthly principal and interest payments
- Potential access to a portion of your home's equity, subject to eligibility
Important Homeowner Responsibilities
You must continue paying property taxes, homeowners insurance, and other applicable property charges; maintain the property; and occupy it as your principal residence. Interest and fees accrue and generally increase the loan balance over time. The loan becomes due when a repayment-triggering event occurs.
Information describes FHA-insured Home Equity Conversion Mortgages (HECMs). Eligibility, available proceeds, costs, and terms depend on borrower age, property value, interest rates, existing liens, and program requirements. HUD-approved HECM counseling is required. This is a loan, not government income or a grant. Borrowers remain responsible for property obligations. Failure to meet loan obligations may result in foreclosure.
How Does a Reverse Mortgage Work?
A reverse mortgage allows eligible homeowners to borrow against a portion of their home's equity. Unlike a traditional mortgage, an FHA-insured Home Equity Conversion Mortgage (HECM) generally does not require monthly principal and interest payments. Instead, interest and fees are added to the outstanding loan balance over time. Here's how the process works.
Determine Your Available Home Equity
The amount available through a reverse mortgage depends on several factors, including the age of the youngest applicable borrower or eligible non-borrowing spouse, the property's value, current interest rates, and FHA program limits.
A reverse mortgage does not automatically provide access to all of your home's equity.
Pay Off Any Existing Mortgage
If you currently have a mortgage, it generally must be paid off when the HECM closes.
The reverse mortgage proceeds may be used to pay that balance. If the available proceeds are insufficient, additional borrower funds may be needed to complete the transaction.
Once the old mortgage is paid off, its regular monthly payments end, but the new reverse mortgage debt remains.
Choose How to Access Your Funds
Depending on the HECM loan structure, available proceeds may be received through a line of credit, monthly advances, an upfront disbursement, or certain combinations.
Some payment options are available only with adjustable-rate HECM loans. Initial disbursement limits may restrict how much can be accessed during the first year.
Continue Living in Your Home
You remain the homeowner and may continue living in the property as your principal residence while meeting the loan obligations.
You must continue paying property taxes, homeowners insurance, applicable property charges, and maintaining the property.
You can also make voluntary loan payments, even though monthly principal and interest payments are not required.
What Happens to Your Home and the Loan?
Do You Still Own Your Home?
Yes. You retain ownership and title to your home.
The reverse mortgage creates a lien against the property, similar to a traditional mortgage.
You may sell your home or pay off the reverse mortgage at any time, subject to the loan's terms and outstanding balance.
When Must the Loan Be Repaid?
A HECM generally becomes due when a repayment event occurs, such as:
- Selling the home.
- No longer occupying the property as the principal residence.
- The death of the last surviving borrower, subject to eligible non-borrowing spouse protections.
- Failure to meet loan obligations, such as paying property charges or maintaining the home.
The loan is commonly repaid from a home sale, refinance, or other available funds.
Why Does the Reverse Mortgage Balance Grow?
With a traditional mortgage, monthly principal payments generally reduce what you owe over time.
With a reverse mortgage, interest, mortgage insurance premiums, and applicable fees generally accrue and are added to the outstanding balance. Additional loan advances also increase the amount owed.
Because the balance can grow over time, your remaining home equity may decrease. Changes in the home's market value also affect the equity available to you or your heirs.
What About Your Family and Heirs?
When the loan becomes due, your heirs may have options to sell the home or repay the loan to retain the property. FHA-insured HECMs include non-recourse protections that generally prevent borrowers and their estates from owing more than the home's value under applicable repayment rules. Eligible non-borrowing spouses may also have protections that permit them to remain in the home if specific requirements are met. These details are worth discussing before choosing a reverse mortgage.
Information describes FHA-insured Home Equity Conversion Mortgages (HECMs). Actual available proceeds, payment options, closing expenses, loan balances, repayment obligations, and spouse protections depend on individual circumstances and applicable HUD rules. Borrowers must meet eligibility requirements, complete required HECM counseling, and continue fulfilling property-related obligations. This information is educational and is not a loan offer.
How Can a Reverse Mortgage Help?
For some Utah homeowners, a reverse mortgage may provide additional flexibility in managing finances during retirement. The potential benefits depend on your home equity, existing mortgage balance, financial circumstances, and long-term plans. Here are four reasons homeowners may consider reverse mortgage financing.
Reduce Required Monthly Mortgage Payments
If you currently have a mortgage, proceeds from an eligible reverse mortgage may be used to pay off the existing loan.
This can eliminate the required monthly principal and interest payment associated with the old mortgage.
However, you remain responsible for property taxes, homeowners insurance, maintenance, and other applicable property expenses.
Access a Portion of Your Home Equity
An FHA-insured reverse mortgage may allow you to access qualifying home equity through available loan disbursement options.
Depending on the loan structure, proceeds could help with living expenses, home improvements, unexpected expenses, or other financial needs.
Available proceeds and how they can be accessed depend on HECM program requirements.
Remain in the Home You Already Own
Many homeowners want to continue living in familiar surroundings rather than selling their property to access equity.
A reverse mortgage may allow eligible homeowners to remain in their primary residence while accessing a portion of its equity.
You retain ownership, provided you continue meeting the loan's occupancy, property-charge, maintenance, and other requirements.
Purchase a Different Primary Residence
A HECM for Purchase may allow eligible buyers age 62 and older to purchase a qualifying new primary residence using reverse mortgage financing.
This may be worth exploring if you want to relocate, downsize, or purchase a home better suited to your retirement.
A substantial cash contribution is generally required, and the new property must meet HECM eligibility requirements.
What Is a HECM for Purchase?
A HECM for Purchase combines a home purchase with FHA-insured reverse mortgage financing in one transaction.
Instead of purchasing the home entirely with cash or taking out a traditional mortgage with required monthly principal and interest payments, an eligible buyer contributes the required funds and finances the remaining eligible amount through a HECM.
The cash needed at closing depends on the purchase price, appraisal, borrower age, interest rates, closing costs, and other program factors. It is not a zero-down financing program.
What Are the Trade-Offs?
A reverse mortgage can offer financial flexibility, but it also involves costs, obligations, and potential long-term consequences.
- Interest, FHA mortgage insurance premiums, and applicable fees generally accumulate and increase the outstanding loan balance.
- Remaining home equity may decline over time, potentially reducing what is available when the home is sold or passed to heirs.
- You must continue paying property taxes, homeowners insurance, and applicable charges, maintaining the home, and meeting occupancy requirements.
- The loan generally becomes due following certain events, including sale, permanent relocation, death of the last borrower subject to applicable spouse protections, or failure to meet loan obligations.
These considerations should be weighed against your financial goals and alternative options before making a decision.
A reverse mortgage isn't the right solution for everyone. My approach is to explain the benefits alongside the costs and responsibilities, so you can determine whether it fits your retirement plans and long-term housing needs.
Information applies to FHA-insured Home Equity Conversion Mortgages (HECMs). Eligibility generally requires borrowers age 62 or older, an eligible principal residence, sufficient equity, a satisfactory financial assessment, and required HUD-approved counseling. Available proceeds, disbursement options, costs, and borrowing limits vary. No monthly principal and interest payments are required while loan obligations are met; voluntary payments are permitted. This is a loan, not a grant or government benefit payment.
Who Qualifies for a Reverse Mortgage in Utah?
FHA-insured reverse mortgages have specific eligibility requirements designed to evaluate both the property and the homeowner's ability to meet ongoing obligations. Qualification involves more than age or home equity. Here's what lenders generally evaluate.
Age Requirement
Borrowers must be at least 62 years old to qualify for an FHA-insured Home Equity Conversion Mortgage (HECM).
If a spouse is younger than 62, special non-borrowing spouse provisions may apply.
Sufficient Home Equity
You generally need enough available home equity to satisfy any existing mortgage liens as part of the transaction.
If reverse mortgage proceeds do not cover an existing mortgage balance, eligible personal funds may be needed at closing.
Primary Residence
The home must be your principal residence, meaning it is the property where you ordinarily live most of the year.
HECM financing is not intended for vacation homes or investment properties.
Financial Assessment
The lender reviews financial information, credit history, available resources, and your ability to pay ongoing property-related expenses.
A financial assessment helps determine whether the loan can be sustained over time.
HUD-Approved Counseling
Before proceeding with a HECM application, borrowers must complete reverse mortgage counseling with a HUD-approved HECM counselor.
Counseling helps homeowners understand costs, alternatives, responsibilities, and long-term implications.
Eligible Property
The property must satisfy applicable FHA appraisal, condition, and eligibility requirements.
Eligible properties may include qualifying single-family homes, certain two-to-four-unit properties, approved condominium units, and eligible manufactured homes.
What Does the Financial Assessment Actually Review?
A reverse mortgage generally doesn't require monthly principal and interest payments, but homeowners must remain financially capable of meeting ongoing housing obligations.
The lender evaluates factors such as:
- Credit and payment history, including property taxes and other financial obligations.
- Income and available financial resources, including Social Security, retirement income, or other acceptable sources.
- Cash flow and residual income after qualifying living expenses and debts.
- The ability to pay homeowners insurance, property taxes, and applicable association charges.
Depending on the assessment, a lender may require a Life Expectancy Set-Aside (LESA) using part of the available loan proceeds to help pay future property taxes and insurance.
A LESA reduces the amount of proceeds otherwise available to the borrower. It does not eliminate all homeowner responsibilities.
What About Special Circumstances?
What If One Spouse Is Under 62?
An eligible spouse younger than 62 may be classified as a non-borrowing spouse rather than a HECM borrower.
Their age can affect available loan proceeds. Certain protections may allow an eligible non-borrowing spouse to remain in the home after the borrower's death, provided applicable HUD conditions are met.
These protections and limitations deserve careful review before closing.
What If I Still Have a Mortgage?
You do not necessarily have to own your home free and clear.
However, existing mortgage liens generally must be paid off when the HECM closes.
If the reverse mortgage provides enough proceeds to pay off the existing loan, the old mortgage can be satisfied as part of closing.
Otherwise, eligible additional funds may be necessary.
Why Is HUD-Approved Counseling Required?
Reverse mortgage counseling is conducted by an independent HUD-approved counseling agency. Its purpose is to help you understand the loan, its costs and obligations, possible alternatives, and its potential impact on your future housing plans.
You can locate an approved counselor through HUD's official housing counselor search:
Eligibility information applies to FHA-insured Home Equity Conversion Mortgages (HECMs). All HECM borrowers must be at least 62 years old. Eligible non-borrowing spouse provisions may apply. Approval depends on property eligibility, available equity, federal debt status, financial assessment, counseling, and applicable HUD underwriting requirements. Borrowers must maintain their principal residence, pay applicable property charges, and maintain the property. This is educational information, not a loan approval or commitment.
How Can You Receive Reverse Mortgage Funds?
One feature of an FHA-insured reverse mortgage is the ability to choose how eligible loan proceeds are received. Depending on the type of HECM, funds may be available as an upfront disbursement, monthly advances, a line of credit, or certain combinations. The available amount and payment options depend on the loan structure and HUD rules.
Single Lump-Sum Disbursement
A fixed-rate HECM provides a single disbursement at closing, subject to applicable limits and mandatory loan obligations.
This approach may be relevant when a homeowner needs to pay off a substantial existing mortgage or complete a qualifying HECM for Purchase.
Future borrower draws are not available under this payment plan. Interest and applicable charges accrue on the amount advanced and financed.
Scheduled Monthly Advances
Eligible borrowers may choose to receive monthly advances under a term or tenure payment plan.
A term plan provides scheduled payments for a selected number of months.
A tenure plan provides scheduled payments while the loan remains in good standing, subject to applicable mortgage and payment limits.
HECM Line of Credit
A HECM line of credit allows eligible borrowers to request advances when needed, up to the available credit and applicable disbursement limits.
The unused portion may grow under the program's credit line growth feature.
This can provide flexibility for future expenses without withdrawing the entire available amount upfront.
Combination Payment Plans
Eligible borrowers may combine scheduled monthly advances with a line of credit.
These arrangements are known as modified term and modified tenure payment plans.
They may appeal to homeowners who want recurring advances while keeping some borrowing capacity available for future needs.
Fixed vs. Adjustable-Rate HECM Payment Options
Fixed-Rate HECM
The interest rate does not change during the loan.
However, the FHA-insured fixed-rate HECM uses a single lump-sum disbursement option at closing, subject to program restrictions.
There is no borrower-accessible revolving line of credit under this structure.
Adjustable-Rate HECM
The interest rate may change over time according to the loan terms and applicable rate caps.
Adjustable-rate HECMs offer eligible borrowers options including a line of credit, monthly advances, or combinations.
Changes in the interest rate can affect how quickly the loan balance grows.
Can You Access All Available Equity Immediately?
Not necessarily. FHA HECM rules limit how much can be disbursed at closing and during the first 12 months of the loan.
Initial disbursement limits depend on the principal limit, mandatory obligations such as existing mortgage payoffs and certain closing expenses, required set-asides, and other applicable rules.
For that reason, the total borrowing capacity is not necessarily the same as the amount of cash available to spend immediately.
Before closing, you should receive an explanation of both the initial amount available and any funds that may become accessible later.
How Does HECM Line of Credit Growth Work?
Under an adjustable-rate HECM, unused credit line availability may increase over time based on the program's credit line growth calculation.
This growth increases potential borrowing capacity. It is not interest earned on a deposit, investment income, or a cash balance owned by the borrower.
Amounts actually drawn become part of the reverse mortgage debt, and interest and applicable charges accrue on the outstanding loan balance.
Credit line availability remains subject to the loan terms, available principal limit, required set-asides, and continuing compliance with loan obligations.
Which Payment Option Makes Sense?
The best choice depends on what you want to accomplish. Someone seeking to replace an existing mortgage payment may have different priorities than someone interested in periodic advances or maintaining a credit line for future expenses. My goal is to help you understand the available options, their costs, and how each could affect your long-term home equity.
This information describes FHA-insured Home Equity Conversion Mortgages (HECMs). Payment options depend on loan type, principal limit, mandatory obligations, required set-asides, initial disbursement limits, and applicable HUD rules. Fixed-rate HECMs provide a single lump-sum disbursement structure. Adjustable-rate HECMs may offer monthly advances, lines of credit, and combinations. Interest and fees generally accrue on outstanding loan balances. Borrowers remain responsible for property taxes, homeowners insurance, maintenance, and applicable loan obligations. This is educational information, not a financing offer.
Reverse Mortgage Costs, Responsibilities & Trade-Offs
One of the most appealing features of a reverse mortgage is that eligible homeowners are not required to make monthly principal and interest payments. However, that doesn't mean the loan is free. An FHA-insured Home Equity Conversion Mortgage (HECM) involves upfront expenses, ongoing loan costs, and homeowner responsibilities. Understanding the full financial picture can help you determine whether a reverse mortgage makes sense for your retirement.
Upfront Loan Costs
Closing a HECM may involve expenses including:
- Lender origination charges
- Property appraisal
- Title, settlement, and recording expenses
- Initial FHA mortgage insurance premium
- Other applicable closing and counseling costs
FHA HECM origination fees are subject to program limits, including a maximum of $6,000. Actual lender charges may be lower.
Many eligible closing expenses may be financed into the loan, reducing the proceeds available to the homeowner.
Ongoing Loan Costs
Interest accrues on the outstanding reverse mortgage balance. FHA mortgage insurance premiums and any applicable servicing charges may also be added over time.
Under current HECM rules, the annual FHA mortgage insurance premium is generally 0.50% of the outstanding mortgage balance, assessed over time.
As charges are added, the loan balance generally increases unless voluntary payments or other reductions offset that growth.
Continuing Property Expenses
Homeowners remain responsible for expenses associated with owning and maintaining the home.
- Property taxes
- Homeowners insurance and applicable flood insurance
- Maintenance and necessary repairs
- Applicable homeowners association charges and assessments
Some borrowers may be required to establish a set-aside for certain property charges following the lender's financial assessment.
Long-Term Equity & Inheritance
Because the outstanding mortgage balance may increase over time, the amount of equity remaining in your home may decline.
This can affect how much you receive when selling the property or how much equity may remain for your heirs.
Future home values, additional loan advances, interest rates, and the length of the loan can all influence the outcome.
Example: How a Loan Balance Can Grow Over Time
To illustrate how costs accumulate, consider a hypothetical reverse mortgage with an initial loan balance of $200,000. Assume a constant combined annual interest and mortgage insurance cost of 6.50%, compounded monthly, with no additional withdrawals, voluntary payments, or other charges.
Hypothetical illustration, not a current interest-rate quote or projected HECM repayment schedule. Assumes monthly compounding at 6.50% divided by 12. Figures are rounded. Actual rates, charges, draws, loan terms, and balances will differ. Property appreciation or depreciation is not reflected in these figures.
No Required Monthly Principal and Interest Payment Doesn't Eliminate Your Obligations
A HECM generally allows you to defer repayment of principal and interest while the loan remains in good standing.
However, you must continue to:
- Occupy the property as your principal residence.
- Pay property taxes, homeowners insurance, and other applicable property charges.
- Maintain the property in accordance with loan requirements.
- Comply with applicable occupancy certifications and other loan obligations.
Failure to meet these obligations may cause the loan to become due and could ultimately result in foreclosure. That's why a reverse mortgage should be evaluated in the context of your long-term ability to maintain the home.
What Protects You and Your Heirs?
FHA-insured HECMs include non-recourse protections. Generally, the lender's recovery is limited by the home's value under applicable HECM repayment rules.
When the loan becomes due, heirs may be able to sell the home or repay the amount required to retain it, including applicable provisions involving 95% of its appraised value.
Family members should understand their options, obligations, and applicable deadlines.
Why Compare Alternatives?
A reverse mortgage may provide flexibility, but it may also be more expensive than other home financing options.
Depending on your circumstances, alternatives could include a traditional refinance, a home equity loan, a line of credit, downsizing, or using other financial resources.
Comparing costs, repayment obligations, and long-term plans can help you make a more informed decision.
Want to understand more about the expenses associated with reverse mortgages?
Information describes FHA-insured Home Equity Conversion Mortgages (HECMs). Actual interest rates, origination charges, mortgage insurance, closing expenses, servicing charges, and available proceeds vary by transaction and applicable program rules. Interest and applicable costs generally increase the outstanding balance unless offset by payments. Borrowers must maintain their principal residence, pay required property charges, and maintain the property. Hypothetical examples are educational only and are not loan offers, disclosures, or guarantees.
Reverse Mortgage Frequently Asked Questions
Considering a reverse mortgage often raises important questions about your home, your finances, your spouse, and your family. Here are some of the questions I hear most often from Utah homeowners.
A Straightforward Conversation About Reverse Mortgages
I'm Corey Moser, a Utah mortgage professional with nearly 30 years of experience. In this video, I explain some important considerations for homeowners exploring reverse mortgage financing.
My goal isn't to convince everyone to get a reverse mortgage. It's to help you understand how one works, what it costs, and whether it fits your circumstances.
Does the lender own my home if I get a reverse mortgage?
No. With an FHA-insured Home Equity Conversion Mortgage, you retain ownership and title to your home.
The reverse mortgage is secured by a lien against the property, similar to a traditional mortgage.
You must continue occupying the home as your principal residence, paying applicable property charges, maintaining the property, and meeting other loan obligations.
Can I lose my home with a reverse mortgage?
Yes, foreclosure remains possible if you do not meet your loan obligations.
For example, failure to pay property taxes or homeowners insurance, maintain the property, or satisfy occupancy requirements may cause the loan to become due.
A reverse mortgage removes the requirement to make monthly principal and interest payments while the loan remains in good standing. It does not remove the responsibilities of homeownership.
What happens to my reverse mortgage when I die?
When the last surviving borrower dies, a HECM generally becomes due and payable, subject to applicable eligible non-borrowing spouse protections.
The estate or heirs generally must work with the loan servicer to arrange repayment, often by selling the property or obtaining other financing.
There are important deadlines after receiving a due-and-payable notice, and extensions may be available under HUD rules.
I recommend discussing these procedures with family members before taking out a reverse mortgage.
Can my children or other heirs keep the house?
Potentially, yes. Heirs may be able to keep the home by satisfying the reverse mortgage debt using their own funds or other financing.
For an FHA-insured HECM, heirs generally may satisfy the debt for the lesser of the outstanding loan balance or 95% of the home's appraised value, subject to applicable HUD rules.
If heirs sell the property, any remaining equity after paying off the mortgage and transaction expenses generally belongs to the estate or appropriate property owners.
What if my spouse is younger than 62?
HECM borrowers must be at least 62, but a younger spouse may qualify as an eligible non-borrowing spouse.
Certain non-borrowing spouses may receive protections allowing them to remain in the home after the borrower's death, provided HUD's eligibility and continuing requirements are met.
Those protections are not identical to being a borrower. In particular, loan advances generally stop after the borrowing spouse's death during an applicable deferral period.
The spouse's age can also affect the initial amount available through the reverse mortgage.
Will a reverse mortgage affect Social Security or Medicare benefits?
Loan proceeds from a reverse mortgage generally do not affect Social Security retirement benefits or Medicare eligibility simply because you receive them.
However, means-tested programs such as Supplemental Security Income (SSI) and Medicaid may be affected if proceeds are retained as countable assets or otherwise alter eligibility.
If you receive needs-based government assistance, consult a qualified benefits adviser before selecting a disbursement strategy.
Can I sell my home after getting a reverse mortgage?
Yes. You can sell your home with a reverse mortgage in place.
The outstanding reverse mortgage balance is generally repaid from the sale proceeds, along with applicable transaction expenses.
If the property sells for more than the payoff and expenses, the remaining proceeds generally belong to the homeowner.
If the loan balance is greater than the home's value, FHA's non-recourse protections and payoff rules become important.
What happens if I move into assisted living or a nursing home?
HECM borrowers must continue meeting principal-residence occupancy requirements.
If the borrower permanently leaves the home, the loan may become due. A healthcare-related absence lasting more than 12 consecutive months can also trigger repayment under applicable rules.
A qualifying co-borrower or eligible non-borrowing spouse may affect the outcome.
This is particularly important for homeowners evaluating long-term medical care or retirement housing.
Can I make payments on a reverse mortgage if I want to?
Yes. Although monthly principal and interest payments generally are not required while the HECM remains in good standing, voluntary payments are allowed.
Making voluntary payments can reduce the outstanding balance or offset some of the interest and charges accumulating over time.
If preserving home equity is an important goal, comparing the effects of voluntary payments may be worth discussing.
Required taxes, insurance, and other property obligations remain separate from voluntary mortgage payments.
A Decision Worth Discussing With Your Family
Reverse mortgages affect more than today's monthly cash flow. They may also influence future housing choices, the equity remaining in your property, and options available to your spouse or heirs. I encourage homeowners to ask questions, include trusted family members when appropriate, and take advantage of the independent HUD-approved counseling required for HECM loans.
Information describes FHA-insured Home Equity Conversion Mortgages (HECMs). Borrowers must continue meeting occupancy, property-charge, maintenance, and other loan obligations. Spouse protections, repayment requirements, heirs' options, available proceeds, and government benefit consequences depend on individual circumstances and applicable rules. This material is educational and does not constitute legal, tax, or benefits advice.
Your Home. Your Equity. Your Decision.
A reverse mortgage may provide additional financial flexibility during retirement. But it isn't the right solution for everyone. Understanding the benefits, costs, responsibilities, and available alternatives is an important part of making the right decision for your future.
I'm Corey Moser, a Utah mortgage broker with nearly 30 years of experience. My goal is to help you understand how reverse mortgages work and review the financing options available for your circumstances. No pressure. Just straightforward information and an opportunity to ask questions.
Prefer to talk? Call me directly at (801) 810-9445
FHA-insured HECM reverse mortgages require independent counseling with a HUD-approved HECM counselor. Learn more about counseling and available resources at HUD.gov .
Corey Moser | NMLS #274942 Nationwide Loans, Inc. | NMLS #1799965 Equal Housing Lender
Nationwide Loans, Inc. is not affiliated with or endorsed by HUD, FHA, or any government agency. Information describes FHA-insured Home Equity Conversion Mortgages (HECMs). HECM borrowers must be at least 62 years old. Eligible non-borrowing spouse provisions may apply. Borrowers remain responsible for property taxes, homeowners insurance, maintaining the property, and meeting principal residence requirements. Interest and fees generally accrue, increasing the loan balance over time. Eligibility, available proceeds, fees, and terms vary. Submission of an inquiry does not constitute loan approval or a commitment to lend.