When an FHA-insured Home Equity Conversion Mortgage (HECM) reverse mortgage becomes due, only the loan balance, including principal, accrued interest, and any mortgage insurance premiums or fees, must be repaid. The loan typically becomes due when the last surviving borrower permanently moves out, sells the home, or passes away, or if the homeowner fails to meet obligations such as paying property taxes, homeowners insurance, HOA dues, or maintaining the property. In the unlikely event that the home value is less than the loan balance upon the maturity event , borrowers and their heirs are not liable to pay any deficiency thanks to the non-recourse protection built into reverse mortgages, ensuring financial safety even if the loan balance exceeds the property value. Repayment is usually handled through the sale of the home, with any remaining equity passed to the heirs. If heirs wish to keep the property, they can repay the loan balance in cash or refinance with a traditional mortgage. Importantly, because the funds received from a reverse mortgage are tax-free loan proceeds, they do not count as income, and only the accumulated loan balance needs to be repaid at maturity. Understanding what must be repaid when the loan becomes due helps seniors and their families plan responsibly, maintain financial security, and preserve home equity throughout retirement.
Reverse Mortgage
Frequently Asked Questions
What has to be repaid when the loan becomes due?
More Reverse Mortgage Frequently Asked Questions
Yes — you can buy a home with a reverse mortgage, and it’s one of the most powerful options available to today’s 62+ homebuyers. Using an FHA-insured LifeStyle Home Loan or Home Equity Conversion Mortgage for Purchase (H4P), older adults can buy a single-family home, townhome or approved condo while eliminating mandatory monthly mortgage payments. ... Read more
The basic requirements for a reverse mortgage are designed by the Federal Housing Administration to ensure that seniors can safely access their home equity while maintaining long-term financial stability. To qualify for an FHA-insured Home Equity Conversion Mortgage (HECM), the most common type of reverse mortgage. There are also proprietary reverse mortgage programs such as ... Read more
If one of the co-borrowers on a reverse mortgage passes away or must permanently move out for health reasons, the remaining co-borrower can continue living in the home with no changes to the reverse mortgage, as long as they still meet the loan requirements. With an FHA-insured Home Equity Conversion Mortgage (HECM), both spouses or ... Read more
With an FHA-insured Home Equity Conversion Mortgage (HECM) reverse mortgage, the principal balance and interest charges do not become due until a maturity event occurs, allowing seniors to live payment-free for as long as they meet the program requirements. The reverse mortgage becomes due and payable only when the last borrower (or eligible non-borrowing spouse) ... Read more
Yes — you can refinance an existing mortgage, home equity loan, HELOC, or other qualifying debts with a reverse mortgage, and this is one of the most common reasons seniors choose an FHA-insured Home Equity Conversion Mortgage (HECM). A reverse mortgage allows homeowners age 62+ to eliminate their current monthly mortgage payment by paying off ... Read more
No — reverse mortgage proceeds are not taxed, making them an attractive financial tool for seniors seeking tax-free cash flow in retirement. With an FHA-insured Home Equity Conversion Mortgage (HECM), the money you receive is considered loan proceeds, not income, which means it is not subject to federal income tax*. Whether you choose a lump ... Read more
The amount of money you can get from a reverse mortgage, specifically an FHA-insured Home Equity Conversion Mortgage (HECM), depends on several key factors that determine your available loan proceeds. Lenders calculate your principal limit (maximum loan amount) based on your age, current interest rates, and the appraised value of your home or the FHA ... Read more
Yes — you will have to pay certain fees with an FHA-insured Home Equity Conversion Mortgage (HECM) reverse mortgage, but many of these costs can be financed directly into the loan, minimizing out-of-pocket expenses. The most common reverse mortgage fees include the FHA upfront mortgage insurance premium (UFMIP), which protects borrowers and ensures the loan ... Read more
A reverse mortgage HELOC is fundamentally different from a traditional home equity loan or home equity line of credit (HELOC), and understanding these differences is essential for seniors exploring safe ways to use home equity in retirement. With an FHA-insured Home Equity Conversion Mortgage (HECM), homeowners age 62+ can access a portion of their home’s ... Read more
With an FHA-insured Home Equity Conversion Mortgage (HECM), seniors have multiple flexible ways to receive funds from a reverse mortgage, making it a highly customizable retirement tool. Borrowers age 62 and older can choose from several disbursement options depending on their financial needs and goals. One option is a lump sum payment, which provides the ... Read more
A reverse mortgage is a unique type of home loan designed specifically for homeowners age 62 and older, allowing them to convert a portion of their home equity into tax-free cash without having to make monthly mortgage payments. Unlike traditional mortgages, where the homeowner makes monthly payments to the lender, a reverse mortgage lets the ... Read more
With an FHA-insured Home Equity Conversion Mortgage (HECM) reverse mortgage, borrowers can choose between fixed or variable interest rates, depending on their financial goals and how they want to access funds. A fixed interest rate is available when taking a lump sum at closing, offering predictable, stable interest over the life of the loan. Variable ... Read more
A reverse mortgage generally does not affect government benefits, making it a safe financial tool for seniors who rely on Social Security or Medicare. FHA-insured Home Equity Conversion Mortgages (HECMs) provide tax-free funds that are considered loan proceeds, not income, which means they do not count as taxable income and typically do not reduce Social ... Read more
You can use reverse mortgage proceeds in a variety of ways to support financial security, lifestyle needs, and long-term planning in retirement. With an FHA-insured Home Equity Conversion Mortgage (HECM), homeowners age 62 and older can access tax-free funds while continuing to live in their home, providing flexible options for managing expenses. Many retirees use ... Read more
When an FHA-insured Home Equity Conversion Mortgage (HECM) reverse mortgage becomes due, only the loan balance, including principal, accrued interest, and any mortgage insurance premiums or fees, must be repaid. The loan typically becomes due when the last surviving borrower permanently moves out, sells the home, or passes away, or if the homeowner fails to ... Read more
A Home Equity Conversion Mortgage (HECM) is the most common type of FHA-insured reverse mortgage designed for homeowners age 62 and older. HECMs allow seniors to convert a portion of their home equity into tax-free cash without making monthly mortgage payments, while retaining full ownership of their home. Funds can be received as a lump ... Read more
Yes, a reverse mortgage can be refinanced, allowing homeowners age 62 and older to replace an existing Home Equity Conversion Mortgage (HECM) with a new reverse mortgage to access additional funds or improve loan terms. Typically this is done when there is home appreciation and/or lower interest rates than the initial HECM loan.