Many seniors have asked me to write about reverse mortgages. I was fortunate enough to have Liberty Home Equity Solutions give me some very important information. I am definitely not an authority on this topic so I thank Liberty for their help.

Reverse mortgages are a possible consideration for seniors who expect to live in their current homes for several years. Reverse mortgages are designed for homeowners age 62 and older. They are called “reverse”mortgages because the lender pays the homeowner.To qualify for this loan, the senior must live in the home as his/her primary residence. Reverse mortgages, unlike other mortgages, do not have income requirements. Making monthly payments are not required for as long as the borrower continues to live in the home.
There are two types of reverse mortgages:

  • Home Equity Conversion Mortgage (HECM)—This program is offered by the Department of Housing and Urban Development (HUD) and is insured by the Federal Housing Administration. These are the most popular reverse mortgages, representing about 95% of the business.  The rates are fixed and adjustable.  There are two types of HECM reverse mortgages, the traditional HECM Standard loan, and the HECM Saver loan. HECM Purchase Loan.
  1. The HECM Saver is a lower cost alternative to the HECM Standard, which makes it more comparable to a Home Equity Line of Credit (HELOC).  It is typically used for homeowners that do not want to access all the funds from their home’s equity and desire lower closing costs.
  2. HECM for Purchase Loan can help homeowners buy their next home without having to make monthly mortgage payments. This loan enables homeowners to use the equity from the sale of a previous residence to buy their next primary home in one transaction. Regardless of how long you live in the home or what happens to your home’s value, you only make one, initial investment (down payment) towards the purchase.
  • Proprietary reverse mortgages— These types of mortgages are offered by some banks, credit unions and mortgage companies for owners of homes with a high values.

Based on the specific type of mortgage, borrowers have the option to receive payments as a lump sum, line of credit, fixed monthly payment for a specific period or for as long as they live in their homes, or a combination of payment options. This money the senior receives is tax-exempt and can be used anyway the borrower chooses.  Here are some additional facts about reverse mortgages:

  • All homeowners must first meet with a HUD-approved reverse mortgage counselor before their loan application can be processed.
  • Homeowners may be required to make specific repairs to their home, which must first be covered by the cash available from a reverse mortgage. Required repairs are typically related to the structural soundness and safety of the home. Homeowners may also elect to make any other improvements and repairs they choose
  • Older borrowers may receive more money, because lenders include life expectancy in calculating loan payments
  • There is a national limit on the amount a senior can borrow under the HECM program.  This limit changes from year to year.

Like all financial decisions, there are some considerations the borrower will have to take into account:

  • The borrower may continue to own the home and can never be forced to leave,as long as the home is maintained and property taxes and
    insurance are paid.
  • If there is in an existing mortgage on the property, the amount received from the reverse mortgage is usually used to pay off the loan.  This can
    increase the cash the senior has available each month, because the senior no longer has to make payments on the regular mortgage.
  • The senior may use up a large part of your home equity over time and have
    less to leave as an inheritance to his/her family.
  • The senior may use up a large part of the home equity over time and have
    less to leave as an inheritance to his/her family.
  • Reverse mortgage borrowers must keep their home in good repair,
    and pay property taxes and homeowners insurance. If the borrower does not have enough money for these expenses, the borrower could face foreclosure and lose his/her home.

If you need additional information regarding reverse mortgages, you should contact HUD at and Liberty Home Equity Solutions at

Please remember that June 15 is World Elder Abuse Awareness Day.  As I always mention, please report any incidents of elder abuse to your local authorities. The website for the National Center for Elder Abuse is

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